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DanUK's Advanced Trend Trading Strategy

  • #181
  • Sep 17, 2010 2:37am Sep 17, 2010 2:37am
Hello all. I am a little gun shy posting here as I am extremely new to FX. I have a few quetions that I need to ask as a check on learning if you will.

1) When I look at a daily chart and establish that there is a downward trend, am I waiting for the peak of a swing-high retracement to take place before going short with the pair? Is this the "Big Picture" of the strategy, and we use S/R and Candlestick patterns to indicate the end of the swing and enter the pair?

2)In the initial lesson you showed two charts. One was the daily USDJPY showing a clear downward trend and the other the H4 USDJPY showing a clear upward trend. You explained how the H4 chart was simply a retracement in the Daily and this is the chart we are trading. Here is where I am confused. By this, do you mean we are going long on the retracement, or we are waiting for a candle stick indicator to appear in which to enter short in the daily downward trend?

I do greatly appreciate you taking the time to assist.

Regards, Eric
  • #182
  • Sep 17, 2010 3:38am Sep 17, 2010 3:38am
Quoting EricOutDaRed
Hello all. I am a little gun shy posting here as I am extremely new to FX. I have a few quetions that I need to ask as a check on learning if you will.

1) When I look at a daily chart and establish that there is a downward trend, am I waiting for the peak of a swing-high retracement to take place before going short with the pair? Is this the "Big Picture" of the strategy, and we use S/R and Candlestick patterns to indicate the end of the swing and enter the pair?

2)In the initial lesson you showed two charts. One was the daily USDJPY showing...
Hi Eric - no need to worry - you're amongst friends here...

I'm sure Dan will answer you more fully but I'll have a go in the meantime.

As far as your first question is concerned you are correct. This is what Dan refers to as entering on a 'discount'. Let's say there is a confirmed uptrend, followed by a pullback downwards, we're then waiting for an opportunity to enter (long) based on fibs, support and resistance, the trend line and then candle patterns.

As for your second question you're now talking about counter trend trading and this is more advanced. Dan has said that he's going to come to that later. For now the advice is to forget the 4 hour counter trend trading and just concentrate on trend trading the daily charts (demo of course for now).

Dan will no doubt clarify further.
When in doubt, sit on your hands...
  • #183
  • Sep 17, 2010 5:59am Sep 17, 2010 5:59am
Thank you gododdin for the reply and your encouragement. I did believe counter trend trading is what I would have been referring to. However, my interpretation of the chart at the time of the retracement would had been that it was not a retracement at all and a change in the trend entirely and therefore we would had been trading with the trend.
In other words, for the given example I would have had no idea that around 7 Aug the USDJPY would pivot and the downward trend would resume.

I guess this arises another question and that is, when reading and trading daily charts, how could 7 months uptrending following a 1 year downtrend be identified as a retracement and not a trend change entirely? I suppose if I am using daily charts, I can't consider it a trade worthy trend unless it has been trending considerable points in that direction

P.S. My insight is that my interpretation of the retracement/trend doesnt really matter. If I entered long on the retracement and tagged my trailing stop, risk managed and I should at least BE. Right? Yikes! LOL

To Dan, I am very grateful for your time. I have sifted through so much transparent and bogus material on the internet, in an attempt to teach myself and learn. I feel you have pulled back many layers of confusion that has hindered my progress and am sure many others. -Eric
  • #184
  • Sep 17, 2010 7:23am Sep 17, 2010 7:23am
Quoting .Entropy
I have a question. Given what you just wrote above, why didnt you get out at the blue box in the chart.

chart attached below.
Hi Entropy/Dan

I think that's a fair question
At your exit point, a channel could not be drawn, so that theory is out (sorry kiwi trader)

To answer your question, I think Dan looks to exit at a S/R level, preferably "a round number" with confirmation of a trend change using lower lo / lower high sequence breakdown

Referring to your exit:
Following right on your exit - price did infact change to higher lo, higher hi sequence (uptrend)

So why did we not exit?
Maybe because:
1 The fact that price gapped up at your exit, we could expect the gap to be filled?
2 The bar creating the gap is a pin type bar, expect a reversal?
3 Although we had a theoretical trend change - there was no follow through. Price did not trade above the high of the signal bar (the bar which created the gap)

I assume the idea is to stay with the trend as long as possible, if in doubt stay in

If the lower lo/lower hi sequence was broke but not did not convert to higher hi/higher lo - we would stay with the trade


I have a problem in defining legitimate peaks and troughs for trend analysis!!

On the chart there are a couple of areas where I have problems i.e. around Dec 2009 and Feb/Mar 2010. These are areas of indecision, but still have highs and lows

Do you require x number of bars between peaks and troughs?.

Thanks in advance
Peter
  • #185
  • Sep 17, 2010 7:28am Sep 17, 2010 7:28am
The above refers to post 177
  • #186
  • Sep 17, 2010 8:26am Sep 17, 2010 8:26am
Quoting EricOutDaRed
Thank you gododdin for the reply and your encouragement. I did believe counter trend trading is what I would have been referring to. However, my interpretation of the chart at the time of the retracement would had been that it was not a retracement at all and a change in the trend entirely and therefore we would had been trading with the trend.
In other words, for the given example I would have had no idea that around 7 Aug the USDJPY would pivot and the downward trend would resume.

I guess this arises another question and that is, when reading...
Hi Eric - you are right about Dan!

you raise some good points that I too struggle with. I've put together a quick diagram (using Paint so it's pretty rough!) and would be very grateful to have Dan's take on this.

Dan -you said in another post that you would be happy to discuss further the role that major S/R has in showing us where the trend is going to change. Would it be relevant to this?

Many thanks
Attached Image (click to enlarge)
Click to Enlarge Name: Trend Change.JPG Size: 17 KB
When in doubt, sit on your hands...
  • #187
  • Sep 17, 2010 9:19am Sep 17, 2010 9:19am
Good thread. Something like J16 thread. Thanks
  • #188
  • Sep 17, 2010 10:06am Sep 17, 2010 10:06am
Hello Dan, please, lets we start to identify long term trading opportunities which are ready or forming now, using charts. It would be the best way to master great staff you teatch us. We can place charts and discuss the situation. Practic is the best way to become a master. By the way, I noticed that fibo levels on 1H help much to enter in trend on retracement. Thank you very much for your great and clear teatching! Regards,
  • #189
  • Sep 17, 2010 10:23am Sep 17, 2010 10:23am
Hi dan,
Pls how do you draw your trend lines? I mean should it be at the lowest low of the bar touching one or two other lows? and again the support and resistance can we also have them on 50? Then at times there are s/r that are not on BRN should we ignore such? just trying to learn are my TL's correct? Thanks
Attached Image (click to enlarge)
Click to Enlarge Name: eg3.gif Size: 22 KB
  • #190
  • Sep 17, 2010 5:46pm Sep 17, 2010 5:46pm
I think the EUR officially resumed the uptrend with the close above 1.3000 this week and the breakout of the consolidation.
  • #191
  • Sep 17, 2010 10:02pm Sep 17, 2010 10:02pm
Quoting lizpet
At your exit point, a channel could not be drawn, so that theory is out
It would appear that in your approach to interpreting price behaviour with respect to channels you believe this to be true. That's fine although its probably at odds with the practices of most successful traders using channels as part of their trend and S&R definition.

Rather than drag the thread off topic given Dan's lack of response on the original question so far I'll make a recommendation. Anyone who is actually interested in using channels to trade and define trend change could gain a great deal by studying Tim Morge's work on median lines.
  • #192
  • Sep 18, 2010 4:21am Sep 18, 2010 4:21am
Quoting kiwi_trader
It would appear that in your approach to interpreting price behaviour with respect to channels you believe this to be true....
Hi Kiwi trader,
Sorry if I offended you, no offence was intended. I do appreciate the use of channels.

I did not explain myself very well in that post (in general). I was distracted by another ongoing event after I had started typing the post.

Anyway, all I was trying to say was that you could not draw the channel you showed, because the peak that you used to draw your channel had not yet happened at the point where Entropy may have exited.

Why did you not use the peak near his possible exit for your channel?

Kind regards
Peter
  • #193
  • Sep 18, 2010 7:29am Sep 18, 2010 7:29am
Dear Dan,

Thanks for your well-explained strategy. I like it. That's exactly where I intend to go.
  • #194
  • Sep 18, 2010 7:39am Sep 18, 2010 7:39am
Hi guys - I haven't deserted the thread! My weekend is pretty busy and I'm out at the moment (just checking in via iPhone!) but I will respond to all questions a little later on this evening!

Just a quick note - what's the difference between a trendline and a channel (except the second line)? Unless I'm mistaken (it happens lol) they are drawn the same way... so I'm not sure I see any added value?
  • #195
  • Sep 18, 2010 6:37pm Sep 18, 2010 6:37pm
Peter,

We got crossed up. It seems that I was responding to Dan's original exit point and you were responding to the responders point.


Dan,

There is sometimes confluence of channel rightmost line and trendline. When there is confluence more people see the same potential resistance to the current short term move increasing the potential entry's reliability.

Sometimes not and as in all things I think the individual has to decide which appeal to them and then make it their own. Personally I prefer channels because I think they better represent the "momentum" of the surrounded move but that doesn't make them right. The only thing that is right is that the market is about to go up, down or sideways.

Don't want to hijack your thread as I believe that a newbie following it is more likely to find success with it if people like me don't confuse it with extra stuff. KISS works.

So, if they are not what you use; enough channels.

Cheers
  • #196
  • Sep 19, 2010 5:14am Sep 19, 2010 5:14am
Quoting GJP
Cheers Dan, very interesting. Do you scale in and out of your trades? At the moment I just take the one trade until it's conclusion. I must admit some recent trades have made a considerable amount of pips only to come back and take me out at B/E. I am starting to think about maybe taking 50% out of a trade in future, at least that way I would have something to show for my trade. Interested in your thoughts Dan.

Good trading.
GJP.
Hi GJP,

(Sorry for the late replies... went to a BBQ yesterday afternoon and it turned into a bit of an all nighter!).

I like to add to trades when a trend develops... my basic rule for this is to ensure that the first position is well in profit and stop is at breakeven and then add on retracements.

With regards to taking partial profits... I am reminded of something clockwork71 once said; it was something of the lines of "I don't take partial losses"! I also think that the trouble is if you take half off then the remainder has to run for 2000 pips to be worth the same as a 1000 pip run. My trading is about building a long term position and allowing a good trend to bring in large long term profits.

Now on the other hand I do understand that the little demon inside will struggle to cope with a run of losses and break even trades whilst establishing a good position. I think this is part of the learning curve and each person must find their own way to deal with it - partial profit taking is one way but my preference would be to try and develop the patience required to allow my full position to run for maximum effect!

That being said, you need to be comfortable with your trading to make things work and if taking partial profits means that you can stick around longer whilst developing the skills and patience required to win those long term positions then go for it - so long as the long term goal is to get to a point where you are getting the most out of your trades by allowing full positions to run.

Regards,

Dan
  • #197
  • Sep 19, 2010 5:35am Sep 19, 2010 5:35am
Quoting bboyomega83
EXCELLENT! I was a little late on the trigger and started selling at 1.3750. Now where did you tend to add along the way? You closed all out at the same spot you said so you didnt take some profit along the way?

I tend to add along the way but i like to move to BE quickly at the FTA and/or around 50 pips profit. Also i tend to cut the losses quickly around -50 to 100 pips. I found that if it goes against me by 50 or more it might not be ready to resume the trend. Do you let it go against you by much? and i think you said you move to BE at the...
Good question! But I think it would be more fun if you told me where I entered!! I had a combination of H4 and daily entries but lets keep it simple and stick with the dailies only. I can tell you that I had 4 positions from daily setups on that down trend (including the very first trade mentioned).

First prize goes to the first person who identifies all those entries correctly lol!!

With regards to your second question... I tend to find that good setups on the dailies don't go against me very much - they tend to be fairly quick breaks. However, if a trade does go against me I don't tend to cut them early... I let the trade work itself out - either it goes to my target (and to breakeven) or I get stopped out. I prefer a mechanical approach to these things - I find it helps to take out the emotional factor when things aren't going right!

Regards,

Dan
  • #198
  • Sep 19, 2010 5:39am Sep 19, 2010 5:39am
Quoting .Entropy
HEY, DANuk,

Given your technique, i am wondering if you enter short at 1.2245 area on the 17th of june. I have tried highlighting it in blue.

Or does this not fit with your criteria?
Hi Entropy,

No I didn't have any trades there/then. Is there something you see that you might have sold? If so please point it out and I will take a look - but I didn't see anything tradable.

Regards,

Dan
  • #199
  • Sep 19, 2010 5:46am Sep 19, 2010 5:46am
Quoting .Entropy
I have a question. Given what you just wrote above, why didnt you get out at the blue box in the chart.

chart attached below.
Hello again,

At that time I was looking for an entry in the 1.3500/1.3600 area... price gapped up a lot on the day and I was getting tempted to close out my trades but I waited for the day to close... I felt the downtrend was still valid and it was only weekend news based speculation that caused the big gap up... the day closed as a shooting star which gave me a bit more reason to believe price was still heading down... if it wasn't sitting on a big gap I probably would have traded it but I didn't add at that point, I just let the market show me what it was going to do at a time of uncertainty.

If the day had been bullish I would have adjusted my stops to take me out if the move up continued.

Hope that answers your question.

Regards,

Dan
  • #200
  • Sep 19, 2010 5:48am Sep 19, 2010 5:48am
Quoting emacro
Looks like the 'dragon' pattern, the exit...
Hello emacro,

I've never heard of the dragon pattern so I just checked it out and yes it does look the same; but I would say by coincidence not design.

Regards,

Dan
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