james16 Chart Thread

Hi SP...can you point out which one of the many is Mike's 'cherry' video please?
I may have viewed it before at some point but don't recall, I've looked through the PF and can't see one called that so I suspect it has a different name....but , I certainly don't want to miss out if there are any Eureka moments to be had

Ugh - if Mike would slow down on the vids, it would be easier....

Mike - do you recall which one that was?

I'll look around again and fire off a note.

I thought it was "intro to pin bars"..

Thanks J. You went through that whole post?? Nothing new in that one for most people here!

You would have fallen asleep! lol

The cherry video was the first one or two in the guest section, if that makes it easier.

Mikes Cherry Video

yep thats it...

edit... i mean "pin bar introduction"

yep yep

thanks

Mike

ROFL

nice! thanks!

Not really.

Bank and institutional traders are there to put orders into the market for their clients and offload the bank's risk into the market (basically). They arent there to net pips. They get risk limits to trade within, so they can massage their orders to make a little, but their main job is to buy/sell what the bank has and doesnt want, or what the bank needs and doesnt have.

Chances are that one making 30% would end up getting fired for breaking his/her risk limits.

If you mean a hedge fund trader, on the other hand, then 20-30% is excellent and puts you at the top of the pile.


(some) desk traders definitely incorporate it, but it isnt the only thing they base their trades on. Like i said, they have other priorities - massaging their entries to get the best possible price and make a spread on the order is more important (and lucrative).

Are there PA-only hedge funds? Probably. But they arent going to be that big, for reasons discussed below.


They will absolutely have troubles with the kind of trade size they need to swing. Like I said, they arent there to make money trading, they are trying to offload the hundred million euros that they need to dump, so it iis based around trying to get that money into the market at a good average price.

Same as the big interbanks - they make money from the spread, not from trading super dragonball doji reversals.

As for the hedge funds (inc daytrading/prop trading firms) who are trying to do the same thing as you, then yeah - at a certain size, they are going run into issues.

Most hedge funds dont trade PA as a methodology. Why?

Firstly, no one wants to give a guy $500m to invest on mystical squiggles on a chart. People dont trust it enough. Hell, before discovering Jim (and making friends with a couple of insto traders), I thought it was all bullshit for a chumps who got lucky during the tech boom and thought they were onto something magic. I am more than happy to admit that I was wrong**, but it isnt really accepted in the mainstream as a sound investing methodology (for a variety of reasons).

** (in this instance, anyways - Jim is the real deal. I still think 95% of small traders/investors are monkeys with an internet connection).

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Then you have the liquidity issue, which you mentioned. While it is obvious that more money = bigger positions, you have to consider *how* much money we are talking about.

We might have a $10k account, which lets us trade $200 on a bar setup. With a 100 pip stop, thats $2 a pip... which equates to 2 mini contracts, or $20,000 worth of currency. Is $20k moving a market? Probably not Are we going to be able to easily get in at our target entry, and out at our target exit/stop? Almost certainly.

Now consider the guy with a $500m fund. His 2% would be $10m. With the same hundred pip stop, you are talking $100,000 per PIP. Which is 10,000 full lots. Which is one billion dollars worth of currency.

A billion dollars.

You think that might move the market?
What are his chances of being able to get in/out at his target levels?

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People also need to understand that the returns they make come from leverage. You are investing $100k, and only using $1k of your own money. Probably less, if you are using stops. Any tiny market move is going to give huge returns. Big players cant do that, and wont - because that level of leverage is very, very risky.

As an example, what is the *true* profit on the aforementioned 100 pip pin on a $10k account? With leverage, your 1R nets you 100 pips @ $2 a pip, a return of $200. Pretty good for an hours work.

But what if you didnt have those friendly folks at IBFX sitting back to lend you the other $19,800? Your $200 could only buy.. .$200 worth of currency. Which gives you the massive profit of $2. For a return matching the leveraged trade, you would need a 10,000 pip runner. You catch many of those?

What's the level that you can trade without running into issues? It will depend on the turnover of the pair in question, the time of day, and the general market activity at the time. Short answer - dunno

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The other main problem they face is that this stuff is risky. It really is, dont fool yourself. We are betting on the outcome of a random process.

Using Jim's methodology, we can be confident about what we are betting on... but it is still risky. And no one in a position to manage tens/hundreds of millions wants to go to their investors and tell them that they made a loss because a swissie pin reversed.

Investment managers get rated by both return and risk*. You dont want to fall into the high risk category, or no one gives you money, and then you dont make your 2 and 20.

*google 'Sharpe Ratio' if you want the gory details. you probably dont though, trust me

Bobby Brown. She was the Goddess of Star Search. And got bounced in the finals because she made this video. I watched that show religiously when she was on it...

Absolutely, the whole post. May not be new to me, but you expressed it differently then I would, so I find something new. It happens all the time with me.

That's why this thread is so valuable to new and older traders. (imo) You may have understood something for so long and someone comes along and presents in a different light. Ergo, lightbulbs above heads.

Wow, good stuff Joel.

I always enjoy reading your posts. You offer great insight into the world of institutions and the big players that make up the markets.

I can somewhat understand why "most hedge funds don't trade PA as a methodology", but then what is their methodology? (black box systems, algorithms, hedging, arbitrage, etc? Why wouldn't a hege fund or a prop shop want a trader that trades J16 PA methodology with an 85% win rate and 12% annual return

Ross

lol. I can just hear the investors on that one . . . ."Didn't you see the traffic on that Pin, you fool!"

Great post as always Joel.


Jim

You name it, someone specialises in it. Fundamental (in either everything, specialising in a particular market, or a particular instrument/sector), tech/a, carry trade, arbitrage, classic value investing, dividend stripping, longterm economics, special situations/workouts, algo/HFT, pairs trading, tape trading, off market, buyout/M&A specialists, option writers, option spread traders, yield curve analysts, etc.

There is one I have read about that specialises in physical soft futures arbitrage - betting that they can buy 40,000lbs of 'lean hogs' and 'store' them until the delivery date, for less than the associated future contract! (i was tempted to give the guy my money, just because it seems so crazy that I *have* to get in on it)

It all depends on the background of the people running the fund/firm.

I'd wager that the majority take a balanced approach though. The specialists tend to run into trouble with correlation and concentration issues. So PA trading could definitely form a part of the overall methodology, whether in a vertical (we want to take a fundamental longterm view on oil, then the chart guy gets us the best entry) or a horizontal (we specialise in short term trading - including option writing, tape trading, and PA anaysis) capacity.

(if you are wondering whether a kickass PA specialist could get a job - absolutely. assuming he wanted one )

The reason behind the small numbers specialising in this kind of PA thing are mainly the aforementioned position size problem, and volatility/variability issues (which, in the investing world, translate into 'risk'). The aim of the game is to minimise volatility (risk) while maximising returns, and for that you need to diversify.

Plus, I suspect there just arent that many people capable of running big money using this kind of approach. For every Jim or Mike, you get a thousand business school grads who think that charting is rubbish*, dont have the technical skills or aptitude for it, and couldnt handle the psych aspects.

* :shh: the majority of the finance world thinks that longterm profits from technical analysis methods are impossible to attain. in a way, we are exploiting this view.

Fiji talks alot about how central the mental part of the game is to everything, and I definitely subscibe to his beliefs. Moving from my 'demo' ($500) account to my 'im kinda comfortable making this part of my portfolio, but im not betting the farm on it so here is 10% of my money' account was stressful enough. Moving up several orders of magnitude to what the funds management world defines as 'real' money would be killer for 99.99% of people.

(I guess my overall point was that there are thousands of different approaches, and this is just one - and so there are myriad reasons that people might be entering/exiting a market at any point in time... we shouldnt assume that they are all looking at the same pinbar as us and wanting to trade it)

this made me laugh out loud.

This is a trade I am considering taking. This is GBPJPY. Formed a bullish pin off of 150 with RSI bullish divergence though you may not be able to see it on my chart. I have not taken a J16 style trade for awhile and am planning to demo trade again for awhile due to losses.

EDIT: Forgot to mark trouble areas on chart. Trouble areas 151.5 area and 152.9 area with 150 ema. Does this seem like correct trouble areas?

haha. That's awesome.. "didnt you watch Jim's last video? everyone knew where price was going to. amatuer. go back to demo!'

Although I cant decide if it is better in a Gordon Gecko voice or a little old lady voice

Awesome endeavor
I plan to do the same in a similar & different manner


based on the link of the above video, which is
www.james16group.us/Members/video/jim/trainingvideo.wmv
it has not been replicated as a guest video.

Anyway, thanks a lot for the new mbqb11 video

it worked!!