Building an equity millipede

Midknight - This is for you.

Price action lesson #1

Learning when not to trade.

At the moment eur/usd is at the moment of 'dont trade'

http://img708.imageshack.us/img708/2117/aa1p.png

Can you see why and when I might have taken the buy positions of today?

Taking tight entries across multiple pairs is very hard, unless you know 'when to trade.'

I use alerts when a price reaches certain area that I know will have a better probability of profitability for myself.

Do you know when to trade?

Please answer for me.

Asian session too slow? I assure you, that is a wrong myth. I take trades any session when I know it is time to trade. And that can happen on any session including asian.

Why take both long and short?

You will see why. But it is also because I dont know which direction eur/usd is heading for this week. Do you? Or does anyone?

Please do not take of the above in a serious tone. Im trying to explain something to you.

Look forward to your answers, Midknight.

Sincerely,

Graeme

Before you answer, Midknight.

Look at the chart I posted 10 minutes ago and now.

http://img2.imageshack.us/img2/3246/82277582.png

It is definitely a pennant.

Do I know which direction it will breakout?

No i dont. I have interest in both directions so I dont care which side it breaks out to.

So it does breakout of that pennant and it goes up.

http://img716.imageshack.us/img716/5884/49090677.png

As I mentioned before I wouldnt open any buy positions now because there are only 30minutes till end of this 4hr candle and most candles have some retrace. If I open a position now it will have more chance of closing out on BE.

However I open one now for all to see.

http://img34.imageshack.us/img34/2525/54723034.png

But I close out as soon as the 5minute candle is complete as it is a pin bar. I look for volatile breakouts only.

http://img841.imageshack.us/img841/7253/39765064.png

And so on.

Sincerely,

Graeme

Yes, now that you have marked it up on the chart


Maybe I don't understand what you mean with this question for just as we cannot know which direction price will go (as you mention in that post and I agree with you), we also don't know when price will do its thing. I have been trying to take the approach of letting the market tell me when that time is and based on how I attempt to enter this tends to favour the europe and usa times of day when the markets are at their highest intraday volatility. Maybe there is some neat unconscious filtering you do that tells you when to trade.....I wonder.

Yes I agree that it can. I tend to see that most of the movements do not start off in Asia though, at least if one is to do them with tight entries that is what I have noticed. I can assume you beg to differ on this? I would hope you are right as then I can alter my current behaviour and get back to more normal sleep hours

I like that you can do the long and short trade ideas at the same time and I feel that is something I should aspire towards. I'm in agreement about not knowing which direction the market is heading this week - who knows! I will continue to put efforts into managing trades like this but I find it difficult psychologically even though the trades in separate accounts.

With kind regards,
MK

EDIT: Thanks for the effort into your prior post - I hadn't seen it before posting this.

If the next 4hr candle is going to be up then where is the best place to enter which will have higher probability of surviving the next few candles?

It is at the open of the candle.

Im very interested in the price action at open of 4hr candle. There must be momentum.

http://img525.imageshack.us/img525/5850/10389192.png

That makes 7 buy positions now and zero sell positions. The last bundle of sell positions in the previous charts all died on BE. My realized loss is now at -75 pips.

I dont like having all my eggs in one basket.

When this uptrend dies down with buyers cashing out and general fear is in the market. I will start another bundle of sell positions

And so on.

Hello Graeme,

I join many others in feeling delighted to have you back in motion. Hope you have fully recovered from your situation. I bet this break gave us all a good enough moment to do some deep dive into your trading approach (and to re-read your posts multiple times to gain further understanding in to your teachings).

Ever since the 200 ema project began, I have been wondering the purpose of this project. I knew the objectivity behind 'letting your trades run' when price kicks away from 200ema as looking back it was quite obvious that one could make a killing in the long run. You also made several references in your past posts that price never stays forever near 200ema (or for that matter any MA/EMA line). What I am really hoping to learn from this exercise is when should I stop and WAIT for a clear and concrete 'confirmation' of price breaking away from the yellow ema line. Price Action becomes horribly choppy and indecisive around 200ema and it almost feels like we are handing over our precious $$$ to the Market Makers hunting our stops. I must admit, I felt very frustrating at times to see price move back and forth above/below the ema line and not know how far away from ema is considered a 'gradual breakout' was another unknown.. so had to keep on trying relentlessly to participate in the market.

Next questions is on drawdown and exposure which you touched a little. I wonder when one should 'pause' after consecutive SL getting hit? I have experienced both emotions during the course of this project which I plan to highlight below in this post so we all can learn from my experience. But before I do that, I was REALLY REALLY hoping (as I am hung up a bit on this!) you would cover our mission statement which I held so dear to heart....

Every business or trading plan needs to highlight a very thorough understanding of what you are risking and what you plan to gain out of our investment (time/capital/personal sacrifice/etc). So, is it true that based on our R:R of 1:4, I should have stopped trading the same pair/setup (i.e 200ema breakout) once we hit 4 SLs and then moved on to another pair/200ema setup? To me, this is essential (I could be completely off base here) as one could easily get carried away with creating a account drawdown of 1000+ pips with the hopes of regaining back 2000+ pips in profit months down the road. I personally would loose sleep over such a significant drawdown (unless loosing 1000 pips is only say 10% of a/c balance by refilling in with some short term profit-taking).

Similar concern with exposure... once during this project, I got on the roller coaster of extreme price action and took a dozen positions across handful of pairs. Even though some were quickly set to BE, margin was still being utilized for newly opened positions. Strong MM rule is required to keep this emotion under control (I know I am stating the obvious here)

And finally, I want to share my trade statistics in a summarized fashion so everyone can have a good laugh at my miserable performance ....

Starting Balance: $5000
PnL = -$690
Drawdown: 13.8%
Total Trades: 86 trades
Profitable Trades: 28 (32%) =>> 23 trades @ BE plus small profit and 3 trades hit TP=80 pips and 2 trades closed with small profit
Loss Trades: 58 (67%) =>> 43 hit SL and I got out early from the rest of 15 trades

% of BE Trades: 26%
% of SL Trades: 67%
% of TP trades: 0.03%

Of the 3 TP trades, If I had let these run until now, I would have gained a collective total of 850+pips which proves your lesson for this project.

Attaching charts for all my TP trades for your reference ...

Welcome back again!

Regards,

Vee

Very good questions and thoughts.

Midknight - Thank you for your detailed response. Look at daily chart of eur/usd. There will be often candles that has less than 10 pip retrace but ends up bold candle. And most of these no retrace bold candles are the beginning of large trends. I find no difference in my profits when I focus on london session or asian session. Personally I think asian session sets the game whilst london walks in and finishes it. You will find that at least 1 out of 5 days in a week there are good setups during asian session. I will never ignore this. It is one of my bread and butter.

VEEFX - First of all my heartiest gratitude for your efforts. Your results are not negative. You have done well and I wish I could have been present to direct you. Your findings are spot on. VEEFX, I will send you a detailed PM little later on.

Update: For a moment I thought the new 4hr candle would turn out to be a down candle.

A volatile breakout as soon as candle opened. I took it and placed sell positions.

http://img526.imageshack.us/img526/4493/49640251.png

My buy positions started dying on BE. I didnt mind as I have no control on such happenings.. However..

http://img820.imageshack.us/img820/8890/90220171.png

However.. It was a fakeout and it took out few of my buy positions that I have established before. Waited for a correct volatile breakout and added 7 more buy positions which totals 10 buy positions.

http://img841.imageshack.us/img841/6718/95234046.png

Currently,

10 buys positions, 0 sell positions. All buy positions SL moved to BE and TP @ 100 pips each, except for 1 position with no TP.

Looks like it will hit my TP soon.

http://img196.imageshack.us/img196/1375/64426357.png

My current realized loss from yesterday is at -124 pips. The fakeout above cost me little bit but I know I will get it back by many folds. Average -12.4 pips loss per position. Still within limits.

Im now currently looking for sell opportunities..

Sincerely,

Graeme

Thanks for the lastest update on your trading. I am always wondering how to build positions both ways and not get taken out right away. I entered with PA on 5 min and notice that my positions are very close to each other and get taken out at BE. If they weren't so close then I would be in at a really good price.

Graeme, if I understand you correctly your advice is WAIT for confirmation of the higher TF( 1H, 4H) then use PA on the 5min to enter.

I follow the principle and took trades only in the hindsight direction. But I would rather be building entries in both direction( Participating)and BE and see what the market does. I tried but often times get taken out on price swings

Please clarify thanks

Good morning, all

Its early morning here in Sydney. Woke up to check on my progress.

I had 10 buy positions before I went to sleep.

9 hit TP of +100 each

Kept 1 position for free. SL @ BE.

My total realized loss for this endeavour was -124 pips before TP was hit.

Total net profit +776 pips for the last 2 days

http://img24.imageshack.us/img24/5306/aa1d.png

Im currently looking at sell opportuntities.

Will continue to update

I also reset my realized loss counter and starting afresh in my mind.

Sincerely,

Graeme

Good morning Graeme,

I caught up with the latest charts and posts, really impressive performance and lessons.

Kindest Regards,

Cam

Good morning, VEEFX

I have read your detailed post few times.

I promised to send you a PM but I thought I will post it into the forum.

Your post comprises of much thought and it seems you had few enlightenment with the project we did.

Your results are impressive.

Taking that many trades for only -13% on account equity.

The main goal I wished to show all was that positions must be held for growth.

Most of positions that I still hold from months or year ago was around 200 ema. Once you choose your profiting ground as 200ema then you are aiming for large reward hence that much of a bigger number of losses.

When a trader chooses 5ema/10ema crossover as their main profiting ground they are choosing to profit on a smaller scale.

A good volatile breakout on 5ema/10ema may go few hundred pips however good volatile breakout on 200ema will go many thousand pips and will be the change of a new major trend.

There was a post that I put up yesterday which replies to member: hubbahubba about this. Please re-read for me.

http://www.forexfactory.com/showpost...postcount=3351

Now, I completely understand your risk tolerance. How most people cannot stomach a few hundred pip loss now for a potential few thousand pips later which might happen next week, next month of even few months after.

If that is the case, you can adjust your profiting ground to a smaller version.

The problem with that is your potential reward that you can skillfully extract on the new profiting ground might not cover your usual drawdown.

Im currently showing all live trading on eur/usd intraweek. My profiting ground is based on 5/10ema so my TP is around 100 to justify that. Most traders lose money because they then use very large stop losses or drawdowns to establish this mission statement of hitting 100 TP. This type of trading is almost scalping for me but Im here to prove a point to everyone. As we all know I build positions and I choose my profiting ground on 200ema as my tolerance is very high.

My tolerance is not high because I have much capital. It is high because I know what to expect with a greater degree of certainty than most traders.

Alot of traders do not know what to expect.

VEEFX, you need to choose your profiting ground. It can be ema or sma or certain timeframe. The bigger profiting ground you select the bigger potential reward is out there.

Problem is some traders choose very large profiting ground and then dont have the necessary patience/persistence to follow it through. Once they abandon they notice something large does eventually come up. Everyone guilty?

Another problem is some traders are little bit more cautious and choose smaller profiting ground and then have very large drawdowns/losses/careless entries so even when they do finally profit appropriately, it just doesnt cover enough and they most likely breakeven at best. Everyone guilty?

Hence the price action interpretation is very very important to save you. Preventing a loss is also same as securing a larger net profit at the end. I wonder how everyone is doing with x3 20 TP exercise. It is because of that exercise, Im able to do what I can do currently.

Some might think, Graeme has changed his trading style. No, my trading style remains the same except I have just selected a smaller profiting ground for a faster progress to show all.

I wonder if my new showings will fuel more confusion than clarity.

Sometimes I just dont know how to answer one question earnestly without spawning another 2. I dont mind the questions however am I providing the right direction as my intention?

Sincerely,

Graeme

Good morning, Chips

Apologies to address you in the same post with VEEFX.

Im just trying to keep this thread from growing too large.

Chips, you said a golden sentence.

"Graeme, if I understand you correctly your advice is WAIT for confirmation of the higher TF( 1H, 4H) then use PA on the 5min to enter."

I would also add in price action/confirmation.

Sincerely,

Graeme

P.S Thank you for your kind words, cam

A trade I just took.

eur/usd 4hr

http://img802.imageshack.us/img802/4192/aa1l.png

Why did I take it there?

Cause I took hindsight/price action not from 4hr chart this time but from 1hr.

eur/usd 1hr

http://img683.imageshack.us/img683/5286/aa1o.png

eur/usd 5min. Pennant forming. Which way will it break?

http://img4.imageshack.us/img4/4192/aa1l.png

While its playing out. I flick through other timeframes. 30min and 15min. I want to see evidence that supports my claim.

eur/usd 30min. Descending wicks, good

http://img39.imageshack.us/img39/1506/aa1s.png

eur/usd 15min. Descending wicks, good

http://img18.imageshack.us/img18/258/aa1h.png

So far, it is looking down. But it can change anytime. And if it does change I will carefully time my exit to save myself from bigger loss

Hi Graeme,

I am happy to see you back, unfortunatly I only found your thread after you had to take a short leave. I am happy to see you back again!

I want to thank you for all you have contributed and I am learning so much!!

Thanks again,

Marc

Graeme, this kind of commentary with charts and reasons why you take certain trades is invaluable for the aspirant trader, thank you very much.

Its breaking out. Im only interested in volatile breakouts.

Is there momentum? It doesnt matter if Im trading near US close. That is irrelevant as volatile breakouts happen anytime, anywhere.

http://img3.imageshack.us/img3/9981/aa1fb.png

And the 5min candle closes into a pin bar...

http://img210.imageshack.us/img210/1876/aa1b.png

Is that a new support happening?

http://img824.imageshack.us/img824/2198/aa1rx.png

Ok, we have a lower low. But are you going to stall there or continue?

http://img714.imageshack.us/img714/3629/aa1df.png

Come on kitty, jump down

http://img263.imageshack.us/img263/4192/aa1l.png

You are most welcome, cam

One of the telltale sign that the current direction is continuing is the continuous new lower low. The further spaced apart the better. Currently our new lower lows are very close together.

And the 5min closes near the low of the previous 5min candle. Is this is?

http://img255.imageshack.us/img255/1876/aa1b.png

There is definitely no momentum as for a moment I thought my platform froze..

While its thinking lets quickly check on other timeframes again. Once again im looking for evidence to support my claim.

eur/usd 1hr. Goody, breakout after pin bar. Classic. Just like I anticipated. Remember anticipation and then participating at a low risk entry?

http://img64.imageshack.us/img64/3678/aa1if.png

3 post back I said Im taking this trade cause I took hindsight from 1hr chart. That was the pin bar on the above 1 hr chart.

It is playing out correctly at the moment.

Then... if this hour is going to be a bold down candle where is the best place for a position to survive?

Correct, it is at the open of the candle or retrace wick. I have my sell position on the retrace wick. Double good.

I cant belive it! Thanx for coming back. I am so thankful for all informations You gave us..

You are most welcome, carolco

First warning

http://img442.imageshack.us/img442/8451/aa2a.png

The next 5min candle. Second warning

http://img836.imageshack.us/img836/4899/aa2ky.png

Time to move stop loss to tighter. Just incase.

http://img829.imageshack.us/img829/797/aa1tc.png

Lets have another look at whats currently happening

eur/usd 1hr

Could the current 5min retrace be the small retrace of the new 1 hr candle? I dont know but Im participating

http://img2.imageshack.us/img2/4544/aa1n.png

eur/usd 30min

Could the 30min chart hinting that it is going into pennant on the 30min chart? I dont know but Im participating

http://img696.imageshack.us/img696/4192/aa1l.png

Whatever happens Im cotrolling my risk.