Strat's Long Term Stress Free Trading

If you don't ask, you will never find out so ask all you want.

Thanks Strat for the answer. I personally decided not to take the trade when I posted the chart but I got to admit that my finger was itching to put in an order. I was seeing signs that i should not take the trades, hence the post, for wisdom and answers from you pros.

I can never understand why people want to trade pairs where 95% of the move has been made.

I particularly like this statement. I would like to ask however, regarding to Dr Joe's, we buy when it's going up and sell when it's going down. So, even if a price has reach all time high/low we will still be looking for opportunity to go long/short when good pasr presents. Correct?

My question is, what does 95% of the move stands for? I do understand when there's double top/bottom formed in the charts, we should avoid entering the market, untill the market shows us the way.

Many beginners (including ME ) when trading trending market(for example: eurusd and audusd for the past few months) would think that "Oh, the price has been going up/down for some time, it has reached the top/bottom already! It has reached 95% of the move already!" This is typical begginers' mindset as you have mentioned somewhere earlier in the thread. That's where you came in and apply the DR JOE'S theory which has changed my trading and how I look at the market (THANKS ).

So, Strat and team, could you could please enlighten me more on 95% of the move. Not to dispute here, just asking questions and learn more

Love this thread.

Thanks
Sean

Hey,

I've been reading this thread for a while (from the beginning and no flash reading), I'm not done yet and that is why I haven't posted here so far but I found this in a different forum (the author was not mentioned in the original text) but I really like it and I red it more then once so I thought sharing that here. hope you'll enjoy it as i did.

Rudy
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Step One: Unconscious Incompetence.
This is the first step you take when starting to look into trading. You know that its a good way of making money because you've heard so many things about it and heard of so many millionaires. Unfortunately, just like when you first desire to drive a car you think it will be easy - after all, how hard can it be? Price either moves up or down - what's the big secret to that then – let’s get cracking!
Unfortunately, just as when you first take your place in front of a steering wheel you find very quickly that you haven't got the first clue about what you're trying to do. You take lots of trades and lots of risks. When you enter a trade it turns against you so you reverse and it turns again and again, and again.
You may have initial success, and thats even worse - cos it tells your brain that this really is simple and you start to risk more money.
You try to turn around your losses by doubling up every time you trade. Sometimes you'll get away with it but more often than not you will come away scathed and bruised You are totally oblivious to your incompetence at trading.
This step can last for a week or two of trading but the market is usually swift and you move on the next stage.

Step Two - Conscious Incompetence
Step two is where you realize that there is more work involved in trading and that you might actually have to work a few things out. You consciously realize that you are an incompetent trader - you don't have the skills or the insight to turn a regular profit.
You now set about buying systems and e-books galore, read websites based
everywhere from USA to the Ukraine and begin your search for the holy grail. During this time you will be a system nomad - you will flick from method to method day by day and week by week never sticking with one long enough to actually see if it does work. Every time you come upon a new indicator you'll be ecstatic that this is the one that will make all the difference.
You will test out automated systems on Metatrader, you'll play with moving
averages, Fibonacci lines, support & resistance, Pivots, Fractals, Divergence, DMI, ADX, and a hundred other things all in the vein hope that your 'magic system' starts today. You'll be a top and bottom picker, trying to find the exact point of reversal with your indicators and you'll find yourself chasing losing trades and even adding to them because you are so sure you are right.
You'll go into the live chat room and see other traders making pips and you want to know why it's not you - you'll ask a million questions, some of which are so dumb that looking back you feel a bit silly. You'll then reach the point where you think all the ones who are calling pips after pips are liars - they can’t be making that amount because you've studied and you don't make that, you know as much as they do and they must be lying. But they're in there day after day and their account just grows whilst yours falls.
You will be like a teenager - the traders that make money will freely give you advice but you're stubborn and think that you know best - you take no notice and overtrade your account even though everyone says you are mad to - but you know better.
You'll consider following the calls that others make but even then it wont work so you try paying for signals from someone else - they don't work for you either.
You might even approach a 'guru' like Rob Booker or someone on a chat board who promises to make you into a trader (usually for a fee of course). Whether the guru is good or not you won’t win because there is no replacement for screen time and you still think you know best.
This step can last ages and ages - in fact in reality talking with other traders as well as personal experience confirms that it can easily last well over a year and more nearer 3 years. This is also the step when you are most likely to give up through sheer frustration.
Around 60% of new traders die out in the first 3 months - they give up and this is good - think about it - if trading was easy we would all be millionaires. another 20% keep going for a year and then in desperation take risks guaranteed to blow their account which of course it does.
What may suprise you is that of the remaining 20% all of them will last around 3 years - and they will think they are safe in the water - but even at 3 years only a further 5-10% will continue and go on to actually make money consistently.
By the way - they are real figures, not just some I’ve picked out of my head - so when you get to 3 years in the game don’t think its plain sailing from there.
I’ve had many people argue with me about these timescales - funny enough none of them have been trading for more that 3 years - if you think you know better then ask on a board for someone who's been trading 5 years and ask them how long it takes to become fully 100% proficient. Sure i guess there will be exceptions to the rule - but i havent met any yet.
Eventually you do begin to come out of this phase. You've probably committed more time and money than you ever thought you would, lost 2 or 3 loaded accounts and all but given up maybe 3 or 4 times but now its in your blood One day – In a split second moment you will enter stage 3.

Step 3 - The Eureka Moment
Towards the end of stage two you begin to realize that it's not the system that is making the difference. You realize that its actually possible to make money with a simple moving average and nothing else IF you can get your head and money management right You start to read books on the psychology of trading and identify with the characters portrayed in those books and finally comes the eureka moment.
This eureka moment causes a new connection to be made in your brain. You
suddenly realize that neither you, nor anyone else can accurately predict what the market will do in the next ten seconds, never mind the next 20 mins.
Because of this revelation you stop taking any notice of what anyone thinks - what this news item will do, and what that event will do to the markets. You become an individual with your own method of trading
You start to work just one system that you mold to your own way of trading, you're starting to get happy and you define your risk threshold.
You start to take every trade that your 'edge' shows has a good probability of winning with. When the trade turns bad you don't get angry or even because you know in your head that as you couldn't possibly predict it it isn't your fault - as soon as you realize that the trade is bad you close it . The next trade or the one after it or the one after that will have higher odds of success because you know your system works.
You stop looking at trading results from a trade-to-trade perspective and start to look at weekly figures knowing that one bad trade does not a poor system make.
You have realized in an instant that the trading game is about one thing -
consistency of your 'edge' and your discipline to take all the trades no matter what as you know the probabilities stack in your favour.
You learn about proper money management and leverage - risk of account etc etc - and this time it actually soaks in and you think back to those who advised the same thing a year ago with a smile. You weren't ready then, but you are now. The eureka moment came the moment that you truly accepted that you cannot predict the market.

Step 4 - Conscious Competence
You are making trades whenever your system tells you to. You take losses just as easily as you take wins You now let your winners run to their conclusion fully accepting the risk and knowing that your system makes more money than it looses and when you're on a loser you close it swiftly with little pain to your account You are now at a point where you break even most of the time - day in day out, you will have weeks where you make 100 pips and weeks where you lose 100 pips - generally you are breaking even and not losing money. You are now conscious of the fact that you are making calls that are generally good and you are getting respect from other traders as you chat the day away. You still have to work at it and think about your trades but as this continues you begin to make more money than you lose consistently.
You'll start the day on a 20 pip win, take a 35 pip loss and have no feelings that you've given those pips back because you know that it will come back again. You will now begin to make consistent pips week in and week out 25 pips one week, 50 the next and so on.

This lasts about 6 months

Step Five - Unconscious Competence
Now we’re cooking - just like driving a car, every day you get in your seat and trade - you do everything now on an unconscious level. You are running on autopilot. You start to pick the really big trades and getting 200 pips in a day doesnt make you any more excited that getting 1 pips.
You see the newbies in the forum shouting 'go dollar go' as if they are urging on a horse to win in the grand national and you see yourself - but many years ago now.
This is trading utopia - you have mastered your emotions and you are now a trader with a rapidly growing account.
You're a star in the trading chat room and people listen to what you say. You
recognise yourself in their questions from about two years ago. You pass on your advice but you know most of it is futile because they're teenagers - some of them will get to where you are - some will do it fast and others will be slower - literally dozens and dozens will never get past stage two, but a few will.
Trading is no longer exciting - in fact it's probably boring you to bits - like everything in life when you get good at it or do it for your job - it gets boring - you're doing your job and that's that.
Finally you grow out of the chat rooms and find a few choice people who you
converse with about the markets without being influenced at all.
All the time you are honing your methods to extract the maximum profit from the market without increasing risk. Your method of trading doesn’t change - it just gets better - you now have what women call 'intuition'
You can now say with your head held high "I'm a currency trader" but to be honest you don’t even bother telling anyone - it's a job like any other.
I hope you’ve enjoyed reading this journey into a traders mind and that hopefully you’ve identified with some points in here.
Remember that only 5% will actually make it - but the reason for that isn’t ability, its staying power and the ability to change your perceptions and paradigms as new information comes available.
The losers are those who wanted to 'get rich quick' but approached the market and within 6 months put on a pair of blinkers so they couldn’t see the obvious - a kind of "this is the way i see it and thats that" scenario - refusing to assimilate new information that changes that perception.
I’m happy to tell you that the reason i started trading was because of the 'get rich quick' mindset. Just that now i see it as 'get rich slow'
If you’re thinking about giving up i have one piece of advice for you ....
Ask yourself the question "how many years would you go to college if you knew for a fact that there was a million dollars a year job at the end of it?
Take care and good trading to you all.

I understand why this level is important and I also understand why it will affect the fate of the other GBP crosses. My question is on when does current DSRI become old DSRI and when can you legitimately draw new DSRI. At confirmed swings?

On my chart the yellow lines are old DSRI and the pink are current.

My reason for asking is, when price is moving sideways it will continually break DSRI drawn from any given major swing. I understand that supply and demand change even in a sideways market, and this is reflected in those very minor breaks. Look at the 11-01 break on my chart (yellow line). Legitimate and accurate...but, are they necessary at that level?

I apologize for perhaps deviating from the main thread emphasis of SR but I've always had an irritating need to just know 'the why' of things. The answer to this will help me clear up some other unknowns also.

Looking at price right now, it appears approaching critical corner of your mentioned 1.6600 resistance and the 2 most recent DSRI (if they are applicable).

Yesterday, price closed below my support of 1.0640 but I note that others have it at 1.0650, 1.0630 and 1.0625 so I using that general area and will say support is still holding.

Today' bar, while not complete could end up as an IB. IF it closes today as an IB at support then tomorrow I will play the break in either direction.

If played as a sell, I will trade this a continuing trend and re-evaluate it around 1.0300. I'll be paying attention to a possible wobble around 1.0530 support and old DSRI.

If played as a buy, it would only be an ATM up to 1.0837 and the Boss. I'd leave a little in play though for a possible ride up to 1.0970 at Strat's mentioned important level to watch.

Strat, is this an appropriate way to read this?

Hey Mstandifer
GBPUSD and USDCAD could go either way with NFP tomorrow. It might not move the market or it might blow SR lines out of the water if it surprises.
You might want to wait out and see how the weeklies close on these pairs unless you are able to monitor them during the news releases.
Nicola

Blackeagle,

I see an interesting divergence between the S&P and DJI.

The S&P is still below it's main DSRI with this last swing and is still waffling around current DSRI which has remained so for about 2 months. Still HH and HL though unless this one makes a head and shoulders.

The DJI however, continues to remain above main and current DSRI. You'll note that it's approaching long term DSRI above though.

(This part is for the benefit of those not familiar with the US stock market)Because the S&P and the DJI basically represent the US stock market as a whole, they are going to move in tandem (yes there are NYSE, AMEX and NASDAQ too but we'll just stick with these 2 for this). This is different than currency correlations because currencies are different instruments and can only be compared to one another. The S&P and the DJI are markets and represent averages of companies in overlapping sectors (S&P are commonly held companies and DJI is large companies).

My question here is, do you see one leading the way here or is this just one of the occasional divergences given the weight of financial companies in the S&P?

P.S. Good thing we only trade shooting stars at the top of swings eh?

Thank you so much for pointing that out! Lately, I've become so focused on studying and trying to read charts that I had completely neglected to see what was coming up on the calendar...LOL! That might have turned out other than expected huh?

I do have the ability to monitor during the day but I've found it messes up my entries due to volatility. Given your comments on how they negate typical support, I'll watch from the sidelines on that one. Monday is another trading day for sure.

Not splitting hairs but it's still only a trend line on the S&P currently - It becomes a DRSI if the test from underneath is rejected ; the TL has then given signals to both sides of the market, ie Support then Resistance. I think the weekly close this week could be revealing as Nicola said.

It's still going up too and I would only short after a significant TL break on strong momentum and then a test of that TL from the underside, then probably still wait for confirmation with a bear candle and LH. I've found that by applying the 'rule of 4' to TLs then it stops you drawing premature TLs that mess your analysis up. (Low, high, higher low, higher high in a bull and vice versa for a bear - only what I apply, works for me!)

Just a quick note here since we seem to be on the subject of both TL and DRSI. Most folks tend to draw these from left to right, meaning in an uptrend they start from the lowest low and then draw up and right for these lines.
In my experience and how I draw them is the exact opposite. For an uptrend, I will start with the most recent swing low and draw down and left to the next most recent swing low. This will give you much more relevant lines because you are using the most recent prices, which are much more in tune to what is happening with price now.

Try it sometime with a daily line chart and see how your angles change. We all end up changing the angles as we move up at either a greater or declining pace, depending on the strength of the trend.

Just my .02 worth.....that and a quarter might get you a cup of stale coffee!

Many Pips

For pinbar entries, which method do Strat and his members use most? I find that there are both advantages/disadvantages for each. Any suggestions and comments?

1.) Set entry at breakout of pinbar with SL at wick. (mostly risk/reward of 1:1 or less to next swing point)
2.) Set entry at breakout of pinbar with SL at 61.8% of pinbar (SL gets hit sometimes before heading up/down).
3.) Set entry at 50% retrace of pinbar with SL at wick. (retrace not always to 50%, but R:R mostly 1:2 or greater)

I see this as a retest of the 1.0650-1.600 support that was broken last week. MY candles look a little different, I have small hammers forming today and yesterday. Looking to go long above 1.0700

Hi All,

All bets are off for me, NFP tomorrow. Still have one gbpusd possition left. I just want to report that just trade only from SR to first SR is really rewarding. Thanks Strat and the Team.

Is this a valid hanging man on the daily? It meets all the criteria except its not at the tippy top of the buying frenzy. However price is well capped at 65.70 by minor resistance that is easily visible on the daily. I guess I will find out 2 moro.

I may be just way very wrong here so feel free to say so but based on what I've read here in this thread and in particular, Strat's most recent post to elitejets, I really thought TL's and DSRI were 2 different things.

I also thought that a DSRI demand line can become a DSRI supply line when it is tested from underneath and rejected but is never a trend line. I might have to be sent back to the very beginning if I'm misunderstanding this.

Exactly right, mstandifer! No standing in the corner with a Dunce hat on for you.

TLs and DSRI are like chalk and cheese or night and day. A TL's use is only to identify the extremes of PRICE and as such, are badly distorted by Stop Runs and big boys' games.

DSRI demand and supply lines, when correctly drawn, identify the price levels at all stages within trends where the buyers and sellers exchange control. They are the ""pressure points"". They provide us with "true" indication of market sentiment and always show us who is in control at any point in a chart. We can use them as the best gauge of Momentum and Market Interest. Unlike TLs, DSRI levels are NOT distorted by Stop Runs or big boys' games.

In my use, they are more valuable than Dow, Gann, Elliott and Fibonacci COMBINED!

I particularly like this statement. I would like to ask however, regarding to Dr Joe's, we buy when it's going up and sell when it's going down. So, even if a price has reached all time high/low we will still be looking for opportunity to go long/short when good pasr presents. Correct?

YES!

My question is, what does 95% of the move stands for? I do understand when there's double top/bottom formed in the charts, we should avoid entering the market, until the market shows us the way.

When it’s obvious the market is putting in a top or a bottom, we need to stay out until the top/bottom is proved/respected or taken out. This is to avoid bottom picking and selling/buying into support/resistance.

Many beginners (including ME) when trading trending market(for example: eurusd and audusd for the past few months) would think that "Oh, the price has been going up/down for some time, it has reached the top/bottom already! It has reached 95% of the move already!" This is typical beginners' mindset as you have mentioned somewhere earlier in the thread. That's where you came in and apply the DR JOE'S theory which has changed my trading and how I look at the market (THANKS).

Dr. Joe never used anything after his CME Pit visit. All he did was keep buying PRICE until it started going down and vice versa. He did not use SR levels. I have taken his approach and added PASR to it to try and improve the performance and eliminate the last losing trend trade. We NEVER know whether we are at a top or a bottom until PRICE has taken out the respective levels. Read and understand Newton’s 1st Law of Motion I posted a couple of posts back.

When PRICE reaches significant historical levels, we need to be even more vigilant to see how PRICE reacts to those levels. PRICE WILL REACT and tell us what to do.

At this point, this could be the 95% BUT we don’t know. My point is why RISK going for the last few pips IF it is. when there are better opportunities elsewhere? The best analogy I can give to this is squeezing the last dregs of toothpaste out of the toothpaste tube.

If this is not clear, ask again.

It becomes old when price does not respect it anymore. But this issue is really subjective, it may be old for me but not for someone else.

I am using confirmed swings to determine supply/demand points. And when saying confirmed swings, I mean, if trend is up, for example, I am looking for a new HH and use previous HL as a confirmed swing low. Because without a new HH, any swing low is not confirmed, IMO.

On your chart, the pink and yellow DSRI lines are not correct according to my definition, because 10/26 and 11/3 swing lows are not meaningful yet due to the fact that 10/23 high is not penetrated.

And one last suggestion, try not to use too many DSRIs on your chart. At the moment, attached is what I have, clean eh? Hope this helps.

One reason of the recent divergence may be the company profits which are being announced. Other than this, I don't see one leading the other. Re. DSRIs, again my priority is SR and HH-HL/LL-LH to determine the trend and then comes DSRI.

Pretty cool example of how important daily closes are.