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PTT Method (Profitable Trend Trading) in Forex

  • #21
  • Aug 22, 2011 6:20am Aug 22, 2011 6:20am
Quoting TheFutureAce
did u take today's IB? on eurusd?
Hello TheFutureAce,

I did not take today's IB on EUR/USD. The reasoning comes from looking at EUR/USD for the past month or so, and what we see is a flat EMA with price doing lots of bouncing around the EMA. This is usually not the best trading environment.

I like to look for a sloping EMA and a bounce off of it, if possible.
  • #22
  • Aug 22, 2011 6:28am Aug 22, 2011 6:28am
Quoting vijidas
Kelvin,

Why a fixed stop loss of 30 pips? why not at the low of the inside bar or low of the previous bar? or why not in a logical location?
Good morning Vijidas,

This is a good question. The answer has to do with backtesting. I know that many people say to put your stop loss at the previous high (for a short) or the previous low (for a long). However, doing so would cause a loss of many pips with this method of trading, in comparison to a fixed stop of 30 pips.

For instance, on the attached screenshot, if using the accepted method of placing your stops at the previous high for shorts, notice that you would place your stop at the high of the bar with the vertical line drawn through it, which would be over 300 pips away.

To trade a trend-trading system you must accept losses through whip-saw, but we must also limit those losses as much as we can. A 300 pip loss is far too much.

So to answer your question, through backtesting I've found 30 pips to be an acceptable stop-loss.

I hope this helps, and if you have any other thoughts or questions feel free to discuss them.
Attached Image (click to enlarge)
Click to Enlarge Name: Stop Loss.jpg Size: 131 KB
  • #23
  • Edited 7:52am Aug 22, 2011 7:32am | Edited 7:52am
The bell-bottom jeans of the late 70’s and 80’s were all the rage, and everybody wore them.

That got me......just kidding. All the best with your thread. We need more threads like yours, pipEASY and numbnuts - for all of us trend traders.

I`m subscribed.


_____________
michael
Be like water.
  • #24
  • Aug 22, 2011 11:21am Aug 22, 2011 11:21am
KM,

Thank you for sharing your system.

If an Inside Bar forms and the subsequent high or low is not broken within the next 24 hours, do you discard the signal and wait for the next setup?

Good trading,
BC2
  • #25
  • Aug 22, 2011 12:00pm Aug 22, 2011 12:00pm
Excellent start. Subscribed..
Quoting KelvinM
Greetings,

Introduction:

I have been a lurker on Forex Factory for many years, but just have not posted much as I’ve not wanted to dump a trading system on the forum, that may or may not be profitable, without being able to include all aspects of trading: philosophy, methodology, money management. All the while I have been reading, testing various systems, and learning all that I could.

In this thread I plan to share some things that I’ve learned over the years and then I will provide the system that I am just now starting to trade...
  • #26
  • Aug 22, 2011 12:30pm Aug 22, 2011 12:30pm
Quoting adowland
Hi, Kelvin, great material for people trying to learn the long term trend trading methods. Like you I have been influenced by Covel and PipEasy on the equity millipede thread (I have'nt begun to read numnuts yet but surely will). A probably dumb question if I may, you say you set your stop loss at the high/low of the prior bar (depending on long or short of course) and exit all the current trades in that trend at that point. Often (on manual backtesting) this is just a relatively minor retracement in that trend which then turns and continues...
Hello adowland,

Nice to hear from you. Glad you have benefited from Michael Covel's books too. I just read a book yesterday where the trader being interviewed said 'trend trading is basically dead' in this market. Every few years somebody else says that, but the fact is that this world is full of trends, markets trend, and people get involved in trends. Always have, and always will.

Anyway, to answer your question, yes if we are stopped out and then get another Inside Bar we enter again and continue on the trade. Someone might think that now we might be too far from the moving average, but as trend traders we ride the trend until it ends, always entering our position with the current trend.

Thank you for your question, and all the best to you.
  • #27
  • Aug 22, 2011 12:33pm Aug 22, 2011 12:33pm
Quoting msmarple
The bell-bottom jeans of the late 70’s and 80’s were all the rage, and everybody wore them.

That got me......just kidding. All the best with your thread. We need more threads like yours, pipEASY and numbnuts - for all of us trend traders.

I`m subscribed.


_____________
michael
Hi Michael,

Glad to meet another bell-bottom jeans wearing trend trader. Should we start a club, meet on Wednesdays, and require all attendees to wear bell-bottoms?

Yes, I wish everybody would read pipEasy and numbnuts' threads, those are professional traders, and I don't mean in the sense of trading for a living but rather they are approaching their trading in a professional manner.

Best to you Michael.
  • #28
  • Aug 22, 2011 12:34pm Aug 22, 2011 12:34pm
Quoting FX_California
Excellent start. Subscribed..
Welcome FX_California, glad to have you join, and please comment or question as able.

Have a good afternoon!
  • #29
  • Aug 22, 2011 12:43pm Aug 22, 2011 12:43pm
Quoting Bobcat2
KM,

Thank you for sharing your system.

If an Inside Bar forms and the subsequent high or low is not broken within the next 24 hours, do you discard the signal and wait for the next setup?

Good trading,
BC2
Hello Bobcat2, thank you for your comment today. I leave my orders in for 1 week and then reassess the market conditions after that time.

The reason I do that is because in any trend you have several days that the market is counter-trend trading, and then resumes the original trend direction. We do not want to miss the resuming of the trend, and an Inside Bar order can remain a good place to get back in the trend for a week or so of the market running counter-trend.

I've attached an example of what I mean. The red arrow down is an Inside Bar (barely) where the low is just missed the next day as the market runs counter-trend for most of that day. The the following day the trend direction resumed and would have taken out our Sell Stop order on its way down for a nice profit.

As was said above, this scenario is fairly common where we see the market running counter-trend for a few days, even up to a week, and then resuming its original direction.

I hope this answers your question, and if you have any other thoughts or questions please discuss.

I wish you a wonderful day today.
Attached Image (click to enlarge)
Click to Enlarge Name: Leave Orders In.jpg Size: 133 KB
  • #30
  • Aug 22, 2011 1:20pm Aug 22, 2011 1:20pm
Hi Kelvin, Thanks for the thread. I am very interested in this method.

Question, You stated that you enter your trades 8:00 PM eastern US time. I am located in eastern US terefore I consider the end of day to be end of NY session at 5:00 PM. My broker is FXDD whixh just happens to have a server time that closes the current daily candle at 5:00 and then begins the new daily candle.

How does the different broker times effect the method?
  • #31
  • Aug 22, 2011 3:40pm Aug 22, 2011 3:40pm
Hi KelvinM

Nice thread and method. Which pairs are You looking on now?

Elovv
  • #32
  • Aug 22, 2011 5:20pm Aug 22, 2011 5:20pm
Hi Kelvin, greetings from Houston, TX. Your method has caught my attention, it really makes sense.

I have one question, just want to verify something. In your Method post you state: Let’s take an example: Say that we are in a downtrend (price is under the 50 EMA) and price then makes an Inside Bar. At the close of the day (shortly before 8:00 PM Eastern) I will place a sell stop order at the low of the present bar/candle. The low of the present bar/candle refers to that inside bar/candle, or are you referring to the candle after the inside bar/candle? Hope this doesn't sound like a stupid question, just want to make sure.

Thank you, Darryl
  • #33
  • Aug 22, 2011 6:23pm Aug 22, 2011 6:23pm
I used to live in Houston, TX. As per my understanding, it would be the inside bar. You may want to put a limit order after the new daily candle opens in your trading platform. Kelvin may confirm...
Quoting Darryl
Hi Kelvin, greetings from Houston, TX. Your method has caught my attention, it really makes sense.

I have one question, just want to verify something. In your Method post you state: Let’s take an example: Say that we are in a downtrend (price is under the 50 EMA) and price then makes an Inside Bar. At the close of the day (shortly before 8:00 PM Eastern) I will place a sell stop order at the low of the present bar/candle. The low of the present bar/candle refers to that inside bar/candle, or are you referring to the candle after the inside bar/candle?...
  • #34
  • Aug 23, 2011 12:07am Aug 23, 2011 12:07am
After I read first page one more time, it appears that the limit order would be on the current bar not from the inside bar...
Quoting FX_California
I used to live in Houston, TX. As per my understanding, it would be the inside bar. You may want to put a limit order after the new daily candle opens in your trading platform. Kelvin may confirm...
  • #35
  • Aug 23, 2011 12:09am Aug 23, 2011 12:09am
Limit buy order on EUR/CAD...
Attached Image (click to enlarge)
Click to Enlarge Name: chart.jpg Size: 43 KB
  • #36
  • Aug 23, 2011 1:33am Aug 23, 2011 1:33am
Hi FX_California,

I see you are using Oanda charting. Oanda's daily candle begins at midnight EST. KelvinM makes his trades at 8PM EST. So...your daily candles will look much different than his because of the 4 hour time differential.

Question: Is this trading strategy effective in both time frames? Hopefully, KM will address this for us.

I am using the IBFX platform as the new daily candle coincides with KelvinM's time for trades. But, I simply make my trades with Oanda.

Great trading!
BC2
  • #37
  • Aug 23, 2011 3:56am Aug 23, 2011 3:56am
Hi Kelvin,
Thank you for sharing this logical trend trading.
I would like to discuss about stop Loss (SL).

When you say you RISK 1/2%, it means whatever your pips of SL (30 pips or 60 pips) ---> your risk is still 1/2%, not more. It just effect the LOT SIZE.
Example:
You risk 1/2% of your equity (i.e. your equity $100000) = 1/2% * $100000= $ 500.
Assume you trade standard account (1 pips = $ 10).
When your SL 30 pips, ---> your lot size = ($500/$10 * 1 pip) / 30 pips = 1.67 lot.
When your SL 100 pips, ---> your lot size = ($500/$10 * i pip)/ 100 pips = o.5 lot.

When we put our SL based on the logical point (it is more difficult to be reached). Yes, in this case our lot size is small, but more difficult to Loss than only just take 30 pips without basing upon reasonable logic in technical analysis.

I am sorry. This is just my opinion. Please comment and advice.

Thank you and regards,
Anton
  • #38
  • Aug 23, 2011 4:03am Aug 23, 2011 4:03am
Hi
If You use IBFX for charting, I guess the new daily candle starts at Asian session. Is´nt Oanda spread high at that time? Maybee its better to find a brooker there the new daily candle starts at London or New Yourk open times for better spread?
Elovv
  • #39
  • Aug 23, 2011 4:57am Aug 23, 2011 4:57am
Quoting Elovv
Hi
If You use IBFX for charting, I guess the new daily candle starts at Asian session. Is´nt Oanda spread high at that time? Maybee its better to find a brooker there the new daily candle starts at London or New Yourk open times for better spread?
Elovv
Hi All,

I think people put to much emphasis on time zone differences especially when you are looking at a DAILY time frame.

Your chosen currency is already trending, that is why you want to enter.
The (hopeful) target is perhaps 300, 600 or 1000 pips away.
Pip values between different feeds would usually be very minimal in comparison.

If I get an inside bar on my feed and you don't, then I'm sure there will be other times when it is vice-versa.

Whether I win on my inside bar and you lose on yours is irrelevant.
Next time, or the time after, it will be the opposite.

Swings and roundabouts.

Regards,
Michael
  • #40
  • Aug 23, 2011 11:48am Aug 23, 2011 11:48am
Quoting Elovv
Hi
If You use IBFX for charting, I guess the new daily candle starts at Asian session. Is´nt Oanda spread high at that time? Maybee its better to find a brooker there the new daily candle starts at London or New Yourk open times for better spread?
Elovv
Hi Elovv,

The Asian market opens at 5PM EDT. This is when FXDD's new daily candle begins; IBFX's new daily candle begins at 8PM EDT...the opening of the Tokyo market 3 hours later. Oanda's spreads have moderated by then. Oanda's new daily candle begins at midnight EDT. Oanda now supports an MT4 platform version and may or may not be what you are looking for.

Good trading!
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