This time next year

***This thread has been updated to eliminate the reasons why it was put into the commercial section. I believe the information in these 4 pages complements my thread in the systems section and so I have removed certain bits however it is worth a read***

This time last year I was a failing trader. I used to fund my account with a small amount and would maybe last a week, possibly two before I blew it on a daft trade. Usually it would be far too big a trade for my account size and more often than not just a random punt in the hope of striking lucky. I tried system after system and it sunk in after a while that following somebody elses system is not the way to go for me. There were always elements that didn't seem logical to me and if there is any doubt in your mind that undermines your confidence in the system you will be prone to abandoning the system pretty quickly and going back to placing random trades in the hope of catching a quick gain. I tried everything to improve my situation but small timeframes, undercapitalisation and a gamblers mentality (ie not treating it as a business) was my consistent downfall.

This time this year (now) I am in a much better place. It sunk in after reading some of the quality threads on this forum that continuing the way I was would be madness. How does the old saying go? Something along the lines of the definition of madness being doing the same thing over and over and expecting different results. Well finally it sunk in that in order to get the different results that I so desperately craved I would have to make some changes. My first credit is to a well known trader on FF for his excellent thread without which I would probably have given up trading altogether. This taught me to demo only until I knew I could make a profit. When I eventually did go live again with a small but more significant account I managed to keep it and build it. I also deposit small amounts each week as I go along to top it up and in this way I am on my way to the dream of "a large account where 2 or 3 good trades a month amount to a staggering income". I'm not there yet but all the time I am moving in the right direction and I haven't blown an account in months.

After my "realisation" (revelation?) the first thing I did was to spend a good period of time on demo just trying stuff out, reading the threads here on FF and reading as many books as I could about trading. Once I had made some progress and saved an amount that I felt right to start trading with I went live.

The second thing I did once I was live again was to reduce my leverage with my broker. Brokers offer leverage of up to 500 to 1 (as I write). That doesn't mean you have to use it! As far as I know most brokers offer you the ability to set your leverage at whatever you want. Now, think it through... If you have leverage of 500 to 1 it means that you need $200 to open a 1 lot trade. At $10 a pip you can be wiped out in a very short space of time. If you only want to risk 2% of your account on any one trade and maybe you only want to have 4 trades open at any one time (to avoid overtrading) and you have an account in the region of $1000 then you SHOULD be trading a micro account for the first thing and secondly your leverage needs only to be around the 10 or 15 to 1 mark. Here's why... if you are risking 2% of a $1000 account which is $20 on each trade and using 200 pip stop losses trading daily charts then your trade size will be 0.01 or 1 micro lot. That's 1000 units of base currency per trade for which your margin requirement at 10 to 1 would be $100. So if you wanted to open 4 trades of 1 micro lot per trade your required margin would be $400, well within your accounts scope.

Most people don't fully understand what leverage is and how quickly it can kill your account. For me it is now more difficult to place random trades with inappropriate trade sizes because my account just won't let me! I could always just go to my brokers website and change the leverage again but that requires more action than just a few mouse clicks to get me into a trade I regret and in this way I have managed to stop the random trade syndrome.

This is posted in 'trading systems' so I'd better get on with it! I do have a method that I use to trade daily charts which uses no indicators and is logical to ME. It isn't startlingly different to any other PA at S/R method but it is different enough and the point of me posting all this is to try to help some newer traders who are struggling and maybe going through the same cycle of losing that I did (and probably everyone else did at some stage). If you are reading this and you are NOT consistently profitable then I can only suggest the following course of action.

1. xxxxxxxxxx

2. xxxxxxxxxx

3. Have a good long talk with yourself and decide what it is you really want. If you want to become a succesful trader then you are going to have to make some changes to the way you think and act.

4. xxxxxxxxxx get yourself a demo account set up and start saving for a bigger account.

5. Once you have read and understood the information and you are ready to start putting together a method that works for you then think through exactly how you want to trade. The threads on FF offer excellent advice on how to trade. Just take the best bits of what you like and understand and put them together into a written, tradeable plan and trade it on demo until you are completely happy with the method you are using and you know that you can follow your plan without fail.

6. If after doing all this you feel in the need for some ideas then I humbly suggest you continue reading this thread and see how I trade. If it gives you some ideas to inform your own trading then it will have been worthwhile.

The method I use is for trading daily charts at the end of the daily candle only. I use monthly, weekly and daily trendlines in conjunction with horizontal s/r to spot high probability locations for trend continuations or reversals. Nothing groundbreaking but a slightly different method than most is all. I use no indicators with the exception of tick-value for money management which tells me the value of 1 mini lot (0.1) and the spread.

I'll get to the heart of the method in the next few posts. In the meantime a little about brokers. Seeing as I only take a trade when the daily candle closes to confirm the shape it makes sense to me to use a broker that fits with your lifestyle. I live in the UK and used to use Alpari whos daily candle closes at 11pm. I now use Deltastock whos candle closes at 10pm. It's only an hour different but I often have to be up early for work and want to get to bed before 11. Work smart not hard, find a broker that gives you what you want.

Oh, and this time next year? Who knows but it's looking rosier all the time.

The first step is to set up the charts. I use a black background as it reduces glare and I like to use green and red candles, red trendlines and blue s/r lines. This is all completely optional and you should use whatever colours are pleasing to your eye.

To set up the charts I zoom out a monthly chart so that I can still see the candles individually and draw any relevant trendlines that I see.

A word about trendlines. To my mind a 4 or 5 touch trendline started out life as a 2 touch trendline. Some people may say that a trendline isn't a trendline until the 3rd touch but all that means is they miss the 3rd touch trade which is often all you will get out of a trendline! Due to my willingness to draw 2 touch trendlines it does mean that I am constantly redrawing daily trendlines as and when they break. My thoughts are that the higher the timeframe the more likely it is that a trendline will hold but don't marry a trendline. Even monthly trendlines are broken all the time and it doesn't necessarily mean the trend is over, it's just changing.

Once I have my chart with trendlines drawn on the monthly chart I then go to the weekly chart and see if there are any lines different to the monthly, often there isn't. I then do the same with the daily timeframe for more local and short term trendlines. Also with Metatrader you will have to go back through the daily chart to "refine" the trendlines as they usually don't draw at the exact price point you wanted. I believe this happens because it puts the trendline point at the start of the month you put it on and not the exact price. It just takes a minute to turn the chart shift off and scroll through.

Once I have the trendlines drawn I stay on the daily chart and draw horizontal lines at the last swing high point and the last swing low point. Charts of eurusd are below in the various stages.

The 4th chart is the daily chart zoomed out one step. Notice that the last swing high and low points correspond with previous s/r, this is not a coincidence.

The 5th chart is how we trade. The trend on this pair at the moment is somewhat difficult to ascertain and depends on your interpretation but I would suggest that the right PA at either of these highlighted areas would signal a good trade.

What is right PA is more difficult to get across but if you haven't read pring on price patterns and/or a good book on candlestick charting then you need to do so!

My entry is usually at the market at the close of the candle. My stop loss always goes the other side of the s or r level by 50 to 100 pips depending on the pair but never more than 200 pips total stop loss. My exits are generally at the next s/r level unless I am trading a strong trend in which case I would move to break even after a 100 pip move in my favour and allow it to do it's thing with the trend, buying or selling in the direction of the trend on every swing high/low point along the trendline and moving the stop loss behind s/r until the trend ends. In this way it is possible to lock in significant gains of between 1000 and 2000 pips for an inital risk of 200.

To clarify, a candle pattern at horizontal s/r on it's own or a trendline on it's own is NOT enough to signal a trade and the higher the time frame the trendline is drawn on the more reliable the signal. Both aspects must be present to ensure a high probability "trading zone". You have probably guessed by now that you don't take many trades with this method but you do have the potential to lock in some good gains for acceptable inital risk and I have done well trading this way over the last few months.

I will post more charts as and when I take trades in the future and hopefully someone will identify with the simplicity and reliability of the method and it will help them.

Thanks for reading this far. I welcome questions about anything you need clarified.

A brief watchlist, what may be coming up in the coming week or two. Some entries next (hindsight of course, always easier!)

Of course not all of these are going to work out. You'll notice usdchf has two lines close together. The fact is that there are two s/r lines that would give valid entries given the PA.

Audusd here. I've posted the monthly chart of this as well. Sometimes it is worth drawing the upper/lower channel lines too even if they are not parallel.

Here's a trade on gbpchf. Previous strong support at 1.36129 broke and retested. You have to remember that although the trendline has moved now the price movements in grey wouldn't have been there at the time you took the trade so the trendline would have been further over. Although the price did move above the trendline and the previous support when the trend resumed it did so with a strong move down giving a good probability of a continuation of the trend. I've been on holiday for a few weeks and not long been back and this was one I missed or I would still be in it

This is usdchf. Notice the trendline touch, the last highlighted candle is the third touch. The first support wasn't to the pip but the second was. You may have taken the trade marked by the arrow (a sell trade seeing as it's a bearish candle) although price didn't quite reach the trendline (at the top of the 2 candles that formed the high). If you passed on that one then the next signal was screaming at you. This doesn't happen all the time but when it does it is high probability.

Some trading nonsense discussed.

1. "Don't try to predict the market, just go with the flow."

Er, well if you're not predicting the market then why are you placing a trade? Surely if you take a trade you must have thought in your head "I think the price is going to go up" (or down) or why else would you have bought/sold it?

Some trading nonsense discussed.

2. Overbought/Oversold

I went through a stage of liking oscillators and then hating them and then liking them again. I have come to the conclusion that anything that is calculated on price can be seen by, er, just looking at the price... One term that I really hate though is overbought/oversold, what a stupid idea. You only have to look at any of the oscillators to know that they can stay in ob/os territory for many, many candles in a row so what does that tell you about the usefulness of the term?

The other nonsense said about oscillators is that they are good in ranging markets but not in trends. Well if you are going to use them then you should just learn how to use them in trends. Stochastic crosses in the direction of the main trend have a good probability but I stick to my above statement that you can see these using the price alone anyway.

nice info thanx

No worries. Hopefully I can post some good trade examples as they happen in the not too distant future.

This is how my Euro USD chart looks,I followed your method of drawing charts.Now let me know how do u take trade?

how many trade do u take in a month?

This is GU chart please correct it if it is wrong...

Here is my template of eurusd at the moment. The chart shows the relevant s/r points. We have identified good strong horizontal s/r and at least one touch of each trendline marked in magenta. The light blue areas are where these strong s/r and trendlines meet. What we have is a "trading zone" or confluence of strong s/r which means that a good candlestick reversal formation at these levels will signal a high probability trade and usually with not too big a stop loss in relation to the potential gain. These trading zones are not always respected but when a trade is signalled in these zones you have a high probability trade.

I usually see 2 or 3 good set ups per month which is in line with what James16 suggests you should be looking for. On occasions you can have a good trend trade open for a few weeks at a time with add ons as well. I am less fussy about entries if they are an add on but I still use s/r to trail the stop behind.

It can be quite a while between signals and it is tempting to take less than perfect set ups but I have found it more profitable to just wait for the best entries.

I would set the chart up as you want it with the candles, etc and put it as a template otherwise you will have drawn s/r levels and then have to change the candle colours, etc.

In terms of the lines they look about right but I wouldn't worry too much with that lower one.

Here's my template again.

thankyou,you changed my view about trend lines,looking forward to see some live trades in coming weeks.

Here's a chart of nzdusd. As we saw above on the audusd monthly chart the upper channel line reversed the price on the 3rd touch. Is nzdusd about to do the same? If it did and it dropped back where would you want to buy it again?

Here is eurgbp. The first chart is zoomed out. Sometimes the first trendline you see isn't the best trendline. From the peak to the last swing high is a 2 touch trendline that may or may not hold. The stronger and better trendline is the 3 touch trendline below it. At the point where this trendline crosses strong horizontal s/r you may find a trade. It's about identifying the best locations for price action and then just watching and waiting for a classic candlestick formation to confirm the hold of s/r.

Talking of eurgbp it appears that the trendline has been reached a little bit away from the horizonatal s/r. I may still take a long here IF the right candle pattern occurs. I'm looking for the price to maybe retest the horizontal support and then close back above the trendline. This would suggest that the uptrend may be about to resume. It's about watching and waiting for the trades to come to you.

This is an upper trendline on gold. It didn't happen to the pip, on the 3rd touch it exceeded the upper trendline a little but if it repels the price the 4th time where would you want to buy back in?

does the arrow signify a buy or a sell trade ?

when a trendline crosses a S/R line. what does that signify and what sort of trade are we looking at here...

That would have been a sell trade, the trend was down.

When a trendline crosses a s/r line it signifies confluence of s/r. In other words you have two good reasons for the price to reverse from it's current direction and head the other way.

The sort of trade we are looking at is a good candlestick formation such as a close below a doji or a bullish/bearish outside candle. The stop loss goes 50 to 100 pips the other side of the s/r levels and then you watch what happens. There is a high probability of your trade reaching at least the next s/r level and if it's a strong trend it could carry on much further. Depending on your attitude to risk you may want to stay at break even until the next pullback to the trendline and add on there moving your stop loss to just behind the new s/r.

I hope that answers it sufficiently?