Vegas Wealth Builder - Part I

Quoting diallist

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Vegas,

Thank you extremely much for taking time to provide such a detailed and educational reply! I really appreciate it!

Now if I may impose again, I have another question. Please refer to the attached chart.

I took my cue from your second EUR/USD chart in the appendix of VWB.

Do I assume correctly that I would enter on the close of the hammer/hanging man? And since it is it's own recent low, to set the stop a couple of pips below it?

If so, then the trade would have been stopped out on the very next bar.

If it hadn't been stopped out, it would have reached a gain of 184 pips before retracing and hitting the stop.

Questions:

(1) How many pips above/below the recent high/low do you set your initial stop?

(2) You've said you never let a winner turn into a loser. How many pips gain constitutes a winner? How do you know when to move the stop to breakeven?

(3) What would you have done when the 184 pip gain started eroding away all the way back to the initial stop? I have several ideas what I would do, but I'd like to hear your answer.

(4) I can see where emotions and psychology can beat up a trader here. Any suggestions on how to maintain discipline?

Thanks Vegas for your generousity.

Dial

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Quoting merlin

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hey vegas, ive havent used you methods (yet) but i hear high praise of you from many sources. just wanted to welcome you to the forum man!

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Quoting accrete

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Hi all, some of you might have deduced that i'm a tinkerer. One look at my crazy leaning trike and bikes you'd know for sure ( http://accrete.com/hpv/ ). . . well i'm the same in just about every area of life.

( : I'm going to post this in the VWB thread in the public forum and also in the james16group thread in hopes of feedback : )

Soooo, when Vegas stated in his VWB document:



...i just haaaaaad to doooooodle. Here is what i did. As a intro note, the charting package shown is by a company called FibonacciTrader and very nice. It allows the user to overlay a higher period's indicators onto the charted period, i.e. Daily MAs on top of 4 hour MAs.

Below are two images of the same 4 hour EUR/USD chart greatly compressed.
The first one shows how the 55sma on a 4 hour chart (The BLACK line) matches up almost to the pip with an 11sma on the DAILY period (the WHITE line)...and i threw in a "Tunnel" 13maDaily in Aqua for good measure ; - ) The yellow lines are the FIBO numbers off the DAILY 11sma. The outer RED lines are the 233 FIBO numbers out from the 4 hour 55sma to show just how closely the two MAs match up from the different periods...close enough to be workable i think (?)

The second image is the same 4 hour chart now showing the FIBO lines from 55sma on 4 hour chart in RED, compared to the original Vegas_Currency_Daily 28ema FIBOs in Aqua.

Here are the images, and then i have a question for the group below the images. I would really appreciate feedback on my thinking here. THX in advance for any comments...including "Yo Crazy Dude". I've learned one RULE in trading and life; Don't take ANYTHING personally . . . so fire away : - )

http://www.accrete.com/fx_posts/J13G...SnextMAs11.PNG

http://www.accrete.com/fx_posts/J13G...xtMAs11_28.PNG

Here is my comment and question to the group:

My hope of course is that Vegas will share some words of wisdom here. I read in the VWB thread how Vegas arrived at the 24/28emas, and i will quote Vegas post here for reference:


OK, so that is why they are there. Now the reason i even began this experiment is that in the VWB doc Vegas talks about incorporating the 1 or 4 hour "methods" into the Daily method using the smaller time frame charts for possible entry signals.

With that in mind i share the following thoughts:

It was suggested that a possible entry setup might be when there were reversal-type candle formations on the 4 hour chart to then look to the Daily chart for entry signals below or above the 24/28 Tunnel, and i understand this principle. My thought/question is, is there any advantage/disadvantage to using (as i tested/show in the above images) the 11/13 tunnel whereby the 11sma on the Daily is matching up with the 55sma on the 4 hour, seeing possible Daily candle formations at the nearby levels as the 4 hour chart is showing.

My initial thought is that maybe this is not a good thing? Namely that you now simply have two indicators showing the same information?? Though i do know several traders that often trade following the 13sma on the daily charts so the "Tunnel" is close to this and it does have a working history.

As you can see from both images there are candle formations with both the Daily_11sma and the Daily_28ema... though to my eyes over the last year of back-glancing, there seems to be many times larger "hits" on the Daily_11sma. ??

Here is a screenshot of two daily euro charts in mt4. Left is the standard 28ema Vegas Currency Daily, to the right is the modifyed 11sma VCD set up. As you can see there are hits on both. Though i suppose having confirming formations on the daily might by psychologicaly calming/confirming...just playing the devel's advocate, maybe that could get one in trouble? But then again, maybe it makes sense to have them correlate closer? I really do not know. That is why i posted this here for discussion.

http://www.accrete.com/fx_posts/J13G...1sma_28ema.PNG
...and here is another shot:

http://www.accrete.com/fx_posts/J13G...ma_28ema02.PNG

Thanks again for any comments.

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Quoting vegas

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Merlin,
Just when I thought all my relatives had given up on me!

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Quoting vegas

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Dialist,
First, a general comment. Of all the currency pairs, I think the EUR/USD is the hardest to trade. I have some theories [maybe I'll get into those later at another time], but my experience tells me that. Having said that, your points are still valid because the same thing happens in the other pairs also.

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Quoting Bemac

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Personally I would be satisfied without the details for now,
but could you list the 8 pairs from VWB in descending order of their Trading Simplicity?

1)
2)
3)
4)
5)
6)
7)
8) EUR/USD

Still wrapping my head around all of this. The more charts I plot it on, the more I want more.

B

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Quoting loudoniii

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Has anyone programmed the 4 fib lines in Intellichart script, as used in FX Trek Intellicharts ?

I've been trying to work out how to do it.. but no luck so far.

I would really appreciate any advice anyone here can give me on this one.

Thanks !

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Quoting HeavyJ

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Thank you Vegas for all the answers to the great questions in this thread.

I have read or more accurately wore out each of the Tunnel Docs you have written and the VWB is on it's way to dogear status.

What has been especially valuable to me, is your candor in your answers to the questions in this post and you selfless nature and attitude.

While I'm nowhere near where I want to be in this game, everything you have written, that I have had the honor to read has solidified my journey and takes me one step closer!

Thanx again!
HeavyJ

BTW: I think in two of your model manuals I have read that you could "write a book on risk".........anyway......I would like to a Vegas Doc on that someday.

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Quoting dnbae

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Hi Vegas,

I have your VWB all setup on MT4, and I was going over a bunch of daily charts. It seems to work very well except in highly trending markets, where price sometimes doesn't even come close to the tunnel area for a long time, and numerous price action trades that look viable would get stopped out for a long string of losses. So I imagine that this strategy is primarily for ranging markets? Do you stay out of trending markets with this model? Thanks in advance.

- dnbae

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Quoting vegas

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Dialist,
First, a general comment. Of all the currency pairs, I think the EUR/USD is the hardest to trade. I have some theories [maybe I'll get into those later at another time], but my experience tells me that. Having said that, your points are still valid because the same thing happens in the other pairs also.

I will start by saying that I almost never wait for the close to initiate a full position. I am already in alert mode before the day begins because the market is trading at or very near the appropriate fib level for the currency pair. What I am now most interested in at this point are 2 things. 1) Speed and momentum moving away from the high or low [whichever case is appropriate] of the day, and 2) Starting with the European session [roughly 4 am est] and moving forward into the US session, where is the 50% retracement of the days range taking place.

Quick Speed [or momentum] away from the high or low of the day signals pure exhaustion, and moving past the 50% mark signals this potential reversal day has a high probability of occuring. Therefore I will initiate some positions if the market can overcome this 50% hurdle. As the day wears on, if I'm right, I will add more as the market powers on ahead. By the close I have a full position with superior pricing.

If I am wrong, I treat the early position as a daytrade and exit. Since by definition the reversal didn't happen, the market is still in the same general fib zone, and start over again the next day and repeat above.

Question 1)
My initial stop is at least 10 -15 pips away from the high or low. This has to be done because of large hedge-fund and bank stop hunting. Yes, they will occasionally come get us there at that level, but it is harder than just 1 or 2 pips under or above the low or high.

If I get taken out within a few days, then the market has to continue to trend against my original position, otherwise if it was just a stop hunt I'll get back in again if it goes back beyond the original high or low.

Example: I am long EUR/USD and market low is at 1.20 for the move. My stop is at 1.1987. Market trades up a little and starts to go lower. If 1.1987 is taken out, and then EUR/USD starts to rally again, somewhere between 1.20 and 1.2010 I'm going to get long again.

Question 2)
I don't have a specific pip number, but the more important point to be made is this: Don't carry a LOSING trade very long [certainly not day after day]. When you do have winners [30 pip minimum] start raising the stop.
When you realize that your entries are all exhaustion moves at the outer fib levels, then you understand that this position should go in your direction very soon. When it does, don't let it come back to bite you. Granted, sometimes the market will come back and get you, but that's part of trading. As a matter of principle, though, I ALWAYS have a portion of my position on until it either 1) hits the maximum profit objective, or 2) gets taken out with a breakeven stop. If I lose 150 pips of gain on this last portion and get stopped out at breakeven then so be it.

Question 3)
Portions of the trade would have stops underneath to protect some gains. How much and where depends on skill level. But even a relative newbie would love to have this problem: "Where do I put my stop or stops to protect a 150+ pip gain?" I'm betting not many haved asked themselves this question anytime soon.

Question 4)
The absolute BEST way to maintain discipline is to be UP on trades. I want my entries to be important, in the sense that the market is at a critical juncture and if I fail it will at least impart information that is valuable to me and for my method. Failure [losses] gets punished by being cut loose, jettisoned, shown the door. It's something that isn't allowed to hang around and wear on you. It only lasts a very short period of time.

In this way you can deal with it effectively. You can be clear-headed and objective. It simply wasn't time for the market to reverse [But, when you do, ohhhh baby, am I going to be there].

Hope I successfully addressed some of your thoughts.

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Quoting vegas

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HeavyJ,
Not a bad idea, I'll give it some serious thought next month.

Since you brought up risk, one thing that I would stress [and ask you to think about] is the relationship between risk/reward and the price level of the market at any given point in time. I believe firmly that NOT all price levels impart enough information to determine risk or reward. What I want is for the market to be at that inflection point where very minute price changes yield large amounts of information as to potential future direction.

Think of this in mathematical terms as a parabolic curve. Let the X-axis be risk; the Y-axis be reward. Where do I want to be? Obviously as far out on the curve as possible because very small changes in X yield huge changes in Y.

This is why it is critical as a trader that you have patience and keep your powder dry. You want to trade when your method tells you the market is at a very critical juncture. If you are right, whopping gains. If you are wrong, relatively small losses.Unfortunately, most traders can't wait. They find themselves having to push buttons.

In VWB that is precisely our goal. Identify potential reversal scenarios because they have the highest probability of success.

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Quoting vegas

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What I want is for the market to be at that inflection point where very minute price changes yield large amounts of information as to potential future direction.

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Quoting vegas

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loudoniii,

I have used intellicharts a long time. But for the life of me, I can't figure out how to write a script that works on their platform. I've contacted FxTrek, and the only thing the support team does is wish me luck. I'm with you on this one.

Probably the biggest reason I do most of my charting on Metatrader 4 now.

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