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Odds are with a 4hr KISS

  • #21
  • Edited 9:50am Mar 18, 2010 9:10am | Edited 9:50am
I thought I would post this GU chart as an example of when NOT to take a trade. Earlier I posted the EU short setup...and some people might think the GU is about to do the same thing(so they think, I might have missed the EU so I'm going to get in on the GU)...but Not So Fast my friends. Make sure you stay true to the guidelines of this method...look for the BEST setups and skip the not so good one(or ones you have doubts about). It will save your account in the long run!

Wanted to add one more thing about this candle...it's 100pips big! That is pretty high risk, as previously mentioned...I prefer candles around 50pips or less. I occasionally will enter on a bigger candle if the conditions look GREAT and if price is about 1/3rd to 1/2 of the way into the candle to reduce the risk.
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  • #22
  • Mar 18, 2010 6:44pm Mar 18, 2010 6:44pm
Quoting Tw0eleven
Speaking of EU in my previous post...I saw this setup early today, but waited to post it to give you guys a chance to possible post it before me. Hope someone caught it!
Hi Two, Nice thread. On this particular trade where was stop placement....above the 4hr pin ? Thanks,Tex
  • #23
  • Mar 18, 2010 7:53pm Mar 18, 2010 7:53pm
Quoting tex123
Hi Two, Nice thread. On this particular trade where was stop placement....above the 4hr pin ? Thanks,Tex
Hi Tex, I always set an emergency stop loss 200pips above/below my entry price. That's in case some wild happens you protect your account from disater should it strike. Assuming you aren't tradin too heavy to begin with or over leveraging yourself! But that's the only stop loss I set...after I enter a trade, then I just check each candle close after that(every 4hr hours...gives you free time to do other things)...if price closes above/below the candle you entered on...then you just MANUALLY exit for whatever the loss is...typically 50pips or less. In this example, the top of the entry candle was 1.3778, so if you can any of the candles after your entry candle close above 1.3778, you would have closed at that level. So in this instance your entry was at 1.3739 and lets saw the next candle might have closed at 1.3800...you would have lost 61pips + spread.

On the flip side...after setting the emergency stoploss I set a 50pip target price. So when you come back every 4hrs to check the charts you either 1) have reached your Target 2) have a candle that closed against you so you exit manually or 3) neither of the above occur and you just evaluate if the entry rules still apply and stay in the trade another 4hrs. But if the entry rules changed(say the ma's turned against you) then you exit for a small profit/loss. In the EU example, it would have taken 3 candles to reach 50pips profit!

Side note...this trade is near the upper limit of what I feel my risk should be...you were risking 60pips or so for a 50pip reward...that's just under a 1:1 risk/reward. You never want to get more than 2:1 risk/reward.

Hope that helps Tex!
  • #24
  • Mar 18, 2010 8:10pm Mar 18, 2010 8:10pm
Thanks Two, That cleared it up because i was wondering about the 200 pip stop. I think it's possible to get a 3 to 5% return a month even with a lot size reduction ...and depends on consisitency like you said.I'll be keeping my eye out and post some charts if i see some potential setups. It looks solid. Thanks again. Tex
  • #25
  • Mar 18, 2010 11:45pm Mar 18, 2010 11:45pm
Hi Tw0eleven, talking about emergency stop loss I do need some advice. What if you've entered a trade but you know you can't sit in front of the computer to monitor the trade when the next 4hr signal comes?

Do you leave the 200 pips emergency stop in place until you can check price again, or would you tighten the stop before you leave your PC? Thanks.
  • #26
  • Mar 19, 2010 7:06am Mar 19, 2010 7:06am
Quoting fthingf
Hi Tw0eleven, talking about emergency stop loss I do need some advice. What if you've entered a trade but you know you can't sit in front of the computer to monitor the trade when the next 4hr signal comes?

Do you leave the 200 pips emergency stop in place until you can check price again, or would you tighten the stop before you leave your PC? Thanks.

I want to make sure I understand your question correctly...are you asking me what happens when the next 4hr "Candle" closes or the next "4hr signal comes" as you stated?

With regards to the 4hr candle close: If you can't come back to check your chars when the next 4hr candle closes...then the decision is up to you really. You can leave the emergency 200pip stop in place and just check the charts next chance you get(this is typically what happens if you feel you took a really good trade setup that fit all the guidelines). Another option would be perhaps move your stoploss from 200 to say 150 or even 100(just in case the market turns around on you...you'd be protecting your account a little more). And the last option would be to just exit the trade and take whatever profit/loss you have at that time if you won't be able to check the charts for a long period of time.

With regards to what you asked me...."can't sit in front of your computer to monitor the stop before the next 4hr signal comes"...well, to be honest with you, I NEVER sit in front of my computer waiting for the next signal. I like to just check the charts for a few minutes prior to the 4hr candle close to see if anything is setting up to trade. Then, when the candle closes if there is a trade setup...I enter the trade and then walk away and check back later.

Hope that helps...let me know if you have any other questions.

On a side note...it's FRIDAY! I typically don't enter any trades on Friday because I like to have 3day weekends from trading. Let my mind unwind and spend time with the family. So on that note...Have a great weekend everyone!
  • #27
  • Mar 19, 2010 10:41am Mar 19, 2010 10:41am
Quoting Tw0eleven
I want to make sure I understand your question correctly...are you asking me what happens when the next 4hr "Candle" closes or the next "4hr signal comes" as you stated?
I mean when the next 4hr candle closes...sorry for the confusion. I know everyday there is at least one candle which I can't check - while I am asleep!

Thanks for the detailed reply. Have a good weekend too!
  • #28
  • Mar 19, 2010 11:27am Mar 19, 2010 11:27am
Quoting fthingf
I mean when the next 4hr candle closes...sorry for the confusion. I know everyday there is at least one candle which I can't check - while I am asleep!

Thanks for the detailed reply. Have a good weekend too!
I know exactly what you mean. I live in the EST timezone so I'm usually sleeping during London Open. If I happen to enter a trade before I go to bed, I set an alarm to get up about 5minutes before next candle close. If it's a good candle close, I go back to bed. If it's a bad one, I close and go back to bed. Whole process shouldn't take more than 10-15minutes. Might be something you can try...or just don't enter any trades before you go to bed. No need to force any trades...just trade when you can.
  • #29
  • Mar 20, 2010 1:56pm Mar 20, 2010 1:56pm
Quoting Tw0eleven
I thought I would post this GU chart as an example of when NOT to take a trade. Earlier I posted the EU short setup...and some people might think the GU is about to do the same thing(so they think, I might have missed the EU so I'm going to get in on the GU)...but Not So Fast my friends. Make sure you stay true to the guidelines of this method...look for the BEST setups and skip the not so good one(or ones you have doubts about). It will save your account in the long run!

Wanted to add one more thing about this candle...it's 100pips big! That...

Well everyone, you may have recalled this post where I recommended not jumping into the trade. And while price did continue down(as you can see by the chart posted below)...I wouldn't call myself wrong. Instead, I hope you guys see things in a different perspective. I wouldn't call it wrong to skip this trade, wasn't scared, wasn't nervous...instead, think of it as being Cautious and Reducing Risk. Afterall, you are trading to make money right? Not lose it!

Now some may disagree with what I said above...but this is how I think of it. If I would have jumped in this trade and won, then what about the next trade that comes along like this...what if I jump in that one and take a loss? Then another one comes along and I say, "well, I have a 50/50 win/loss ratio so far on these trades...maybe I'll try one more." Oops, another loss! Well my friends, you just lost 2 out of 3 trades because you took trades that really weren't that good in the first place. And now you might be pissed at yourself or the market or worst yet, you think this method is flawed and doesn't work. That's definitely not good for the mental aspect of trading.

So what's the worst that can happen if you skip the trade? Well, you missed out on 50pips...your account balance is the same and you are just looking for the next trade. I really don't see much wrong with this option. If truly believe it's the successful traders who pick this option!

Hope everyone is having a good weekend so far!
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  • #30
  • Mar 21, 2010 2:25am Mar 21, 2010 2:25am
Quoting Tw0eleven
Well everyone, you may have recalled this post where I recommended not jumping into the trade. And while price did continue down(as you can see by the chart posted below)...I wouldn't call myself wrong. Instead, I hope you guys see things in a different perspective. I wouldn't call it wrong to skip this trade, wasn't scared, wasn't nervous...instead, think of it as being Cautious and Reducing Risk. Afterall, you are trading to make money right? Not lose it!

Hi Tw0eleven, I was going to ask you a question on the same chart but then saw your post! Now I understand the reasons that you skipped the pin bar signal on post #21. Then on Friday I noticed a big bearish candle (annotated with a green arrow below) and I thought to myself this could probably be a valid entry signal:

1. Price has closed below both the 5ema and 20ema
2. The 5ema is about to cross below the 20ema
3. MACD is sloping down
4. The signal bar is a bearish engulfing candle

However since the candle size is too large (>80 pips), this trade would be a pass. Just for illustration purpose - assuming the candle size was within your risk limit, do you think it's a good signal and would you have taken the trade?

I actually know you'll still say no, as it's a Friday!
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  • #31
  • Mar 21, 2010 9:07am Mar 21, 2010 9:07am
Quoting fthingf
Hi Tw0eleven, I was going to ask you a question on the same chart but then saw your post! Now I understand the reasons that you skipped the pin bar signal on post #21. Then on Friday I noticed a big bearish candle (annotated with a green arrow below) and I thought to myself this could probably be a valid entry signal:

1. Price has closed below both the 5ema and 20ema
2. The 5ema is about to cross below the 20ema
3. MACD is sloping down
4. The signal bar is a bearish engulfing candle

However since the candle size is too large (>80 pips), this...

Good chart and Good eye my friend! Everything you mentioned above I agree with and it would have been a nice entry candle if it wasn't greater than 80pips. As for it being friday...I just personally don't like to trade on Friday but that doesn't mean you can't trade it! To be honest, I have seen some Friday candles that work out great(you might have to hold over the weekend though). One of my reasons for not trading on Friday is that in my experience I never know if the trends will continue or if traders will stop trading(lose momentum) getting ready for the weekend or if traders will take profits and the trend will reverse. But again, that's just me...and I also like 3 days weekends(from tradin)! haha

One more thing...I do have a second setup on the 4hr method that I have been holding off on because I wanted to see how many people were interested in trading this method and getting the first setup down before introducin the second. However, it seems that you are doing pretty well with the first so I will explain the second.

We will use the same chart of GU from friday. You correctly pointed out the bearish engulfing candle along with 5/20 crossing down and macd histogram sloping down...Only problem, the entry candle was too big. How do you solve that? Well, you wait for a pullback at/near the 5/20 ma's!!! In this case, the next candle, as you can see, pulled back to the 5ma(1.5188) which was very close to the 20ma. That's where you would have gone short. This would greatly reduce your risk should the trade end up going against you! Also, you have a couple things workin in your favor: 1) the price would have to reverse against the currnet trend which isn't always easy 2) price would have to fight it's way back through the Movings Averages, also not always easy to do and 3) Since you are trading the 4hr charts, it usually takes a while for macd to turn around...another not so easy thing to do.

So in this example: you would have went short on the pullback oof the candles AFTER the bearish engulfing one with your entry approximately 1.5180ish. The top of the Bearish engulfing candle was 1.5153...thus giving you an approximate risk of about 80pips if the candle closed against you. That's within my personal limit of 2:1 risk/reward.

Side note: Personally, on GU I like to look at a few key areas for price to stall at, the 00's, 20's, 50's, 80's(ex: 1.5200, 1.5220, 1.5250, 1.5280). With EU and EJ I mainly look at the 00's and 50's. Also, if you are going to use this second entry method...you will need to be available to look at your charts since you'll never know exactly when price is goint pullback for your entry. If your platform allows it, you can also set alarms that way you are still able to do things around the house without having to be glued to the computer screen.

I know I just gave a lot of information...if any of it needs clarification, please let me know. Cheers!
  • #32
  • Mar 22, 2010 6:53am Mar 22, 2010 6:53am
While I'm still waiting for a good setup, though I would post what I see so far. Below you can see that all 4 pairs have been trending down pretty nicely, but what's missing? The normal pullback you get with the market. But one may be coming??? You can see where I have the yellow circles, the price candles stopped making new lows and actually have started to higher/above the previous candles. There's plenty of room to move up to the 20ma which is where I would expect price to go price can close above the 5ma. And it appears that macd histogram is starting to form a "round" bottom..thus the momentum down is slowing and might turn up for a little while. Of course, I could be wrong with all of this too...who knows? We never know 100% in this market...we just try to put the odds in our favor. So in conclusion...price has dropped pretty far without a pullback and appears to be losing momentum down...so I'm waiting before taking any more shorts. And there is still nothing lined up for longs yet...so still waiting. I'll take a look at the candle close at 8am EST...but right now, it looks like I'll have the rest of the morning free to do some other things.
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  • #33
  • Mar 22, 2010 7:09am Mar 22, 2010 7:09am
Quoting Tw0eleven
One more thing...I do have a second setup on the 4hr method that I have been holding off on because I wanted to see how many people were interested in trading this method and getting the first setup down before introducin the second. However, it seems that you are doing pretty well with the first so I will explain the second.
Wow, thanks for the additional bonus! Next time I'd know how to handle when a similar signal appears. By the way, I don't mind trading on Fridays
though I don't like holding a trade through weekend!

Now that I've learned quite a bit about this method, it's time to let the material sink in and do some practising. Will see how it goes!
  • #34
  • Mar 22, 2010 7:15am Mar 22, 2010 7:15am
I still don't see anything on GU or GJ.

As for EU and EJ...it appears they both sold off from their highs in the final hour of the candle close. They could be condsidered bearish engulfing candles...in a downtrend with the ma's pointing down. However, there are two things I don't like...1) price didn't make a new low, but did make a new high compared to the previous candle 2) macd histogram seems to be flattening out and/or turning up(meaning the selling has started to lose momemtum).

So since there are a couple things I don't like...I'm skipping any trades right now. Practicing a little patience and waiting for the Higher Probability trades. The choice is always yours of course, it's your trading account. I learned my lesson before making some beginner mistakes and blowing accounts.
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  • #35
  • Mar 22, 2010 7:18am Mar 22, 2010 7:18am
Quoting fthingf
Wow, thanks for the additional bonus! Next time I'd know how to handle when a similar signal appears. By the way, I don't mind trading on Fridays
though I don't like holding a trade through weekend!

Now that I've learned quite a bit about this method, it's time to let the material sink in and do some practising. Will see how it goes!
Excellent, good luck to you! And please, post some charts and keep asking questions if you have any.

Also, I don't like holding over the weekend either. So if I happen to trade on a Friday, it's usually during London or early US session that way I can close before the market closes Friday afternoon!

As a friend of mine says..."May the pips be with you"
  • #36
  • Mar 22, 2010 8:12am Mar 22, 2010 8:12am
Quoting Tw0eleven
I still don't see anything on GU or GJ.

As for EU and EJ...it appears they both sold off from their highs in the final hour of the candle close. They could be condsidered bearish engulfing candles...in a downtrend with the ma's pointing down. However, there are two things I don't like...1) price didn't make a new low, but did make a new high compared to the previous candle 2) macd histogram seems to be flattening out and/or turning up(meaning the selling has started to lose momemtum).

So since there are a couple things I don't like...I'm skipping...
Well, it does appear I missed out on the shorts. On the positive side, at least I didn't go long and take a loss right? Protect your account...live to trade another day!
  • #37
  • Mar 22, 2010 11:09am Mar 22, 2010 11:09am
211, I actually only trade pullbacks. unfortunately, this keeps me from taking certain types of trades. and i only get a hand full of trades per week on the h4, but, they are usually good. A couple of these usually occur when i'm asleep. Teaching yourself to go long when the market has seemingly reversed and starting to look short can be cause for consternation. however, it greatly reduces the risk.
  • #38
  • Mar 22, 2010 11:30am Mar 22, 2010 11:30am
Quoting Scottie
211, I actually only trade pullbacks. unfortunately, this keeps me from taking certain types of trades. and i only get a hand full of trades per week on the h4, but, they are usually good. A couple of these usually occur when i'm asleep. Teaching yourself to go long when the market has seemingly reversed and starting to look short can be cause for consternation. however, it greatly reduces the risk.
Thanks Scottie,

I hope others read this(especially newbies) and take away from it that you can never been too cautious. Better to save your account and miss a good trade then blow your account by taking bad ones(not too good setups)...Patience and discipline usually rewards you in this market!
  • #39
  • Mar 22, 2010 7:04pm Mar 22, 2010 7:04pm
Hi Tw0Eleven,

Thanks for sharing your strategy.
Is this a valid entry on this USDCHF chart? I entered just below the crossover of the 5 and 20mas.

Thanks.

PS.: Added the image as an attachment. Hope it works.
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  • #40
  • Mar 22, 2010 8:05pm Mar 22, 2010 8:05pm
Quoting Tw0eleven
Thanks Scottie,

I hope others read this(especially newbies) and take away from it that you can never been too cautious. Better to save your account and miss a good trade then blow your account by taking bad ones(not too good setups)...Patience and discipline usually rewards you in this market!
I apologise if this question has already been answered, but what do you use the 200ema for?
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