The Confession & The Secret

- Better Volatility Triggers
- Keeping your hand inside the Box
- Resisting the Reverend Mother's taunts to withdraw
- Have enough fuel in the tank for the entire Swap Cycle

Just for the record I have never used martingale in any trading situation.

The above post was based merely an observation I made regarding the system/method you are using, it is similar to what i have played around with in the past hence my reason for posting.

I apologies for the disturbance in your thread and will get back to my own style of trading.

So long.

This is turning out to be exactly the kind of day I needed. The losses are piling up! This will give me a very good look at how well or how poorly the strategy will break-even and how much time it will take to accomplish that task.

I've padded today's Swap Sequence with a few additional arbitrary Swaps, just to make sure that there would be a significant aggregate loss to recover from.

I'm still in the Swap Sequence as of 16:15 GMT with about 8 Swaps @ -31 pips. Most of them were added by me intentionally, for the purpose of digging a deeper hole. Once you see the chart after the trading session in my journal, you will see that there really wasn't that many Swaps to make and that the current losses up to this point was significantly less than 31 pips.

So, I've just padded the session with additional Swap losses (intentionally) to arrive at an aggregate net loss of -58.3 pips.

Again, this week, I am trying to get the trade in trouble early - so I can better understand in real-time, what's necessary to reach BE.

To be crystal clear - if I were trading this to make money, then there has been only one (1) Swap thus far. Because I am basically running a stress test all week long on the V-Trigger, I have intentionally added Swaps to pad the loss, for a total of 13 Swaps thus far, with 12 of them being negative net losses.

This will be apparent after I post the final statement from the trading platform and the resultant chart showing the Swap line and the price action.

Are you using a market profile point of control or have you tried using it?

Ok, so I've created a ton of Swap debt: -114.6 pips worth. That should be enough to solidify a loss for today's session.

Now, what I want to see is how long it takes to reach BE, or if BE can be reached from here.

The original Swap line was $1.39257 at the 1430 hr GMT. If you look at any EURUSD M15 chart, you will see that today's trade would have had only one Swap before 1600 hrs GMT, followed by five (5) additional Swaps through 1830 hrs GMT for a total Swap charge of -73 pips through 1830 hrs GMT (using the Swap on Close method). So, I've intentionally padded the cost of business today.

Now, using the original 1430 hrs GMT Swap time with its line at $1.39257 and with the current trade being Long, I'll cease all padding and use the optimal Swap method of 'Swap on RPO Cycle' and/or Swap on Real-Time Ask/Bid Cross of V-Trigger Line (discretionary). This will officially begin the recovery attempt from this point forward.

I'm using one of my indicator creations, coupled with a "double stochastic" arrangement to set the line - that's it. Now, I could use Harmonics, but I'm not studying that right now as that requires a different kind of Swap technique with a larger draw per Swap.

The Swaps are still discretionary for the most part, but today, I've been padding the losses to test the strength of recovery. Yesterday, I could not get it wrong and the market ran to recovery +7 pips immediately. Today, I forced a lot of unnecessary Swaps to guarantee a failure for the day.

BTW - the causality behind today's congestion in the EURUSD can easily be seen on the Daily Chart using something as simple as ATR. From October 1th, through today, average true range has been in decline, with the previous two trading days range coming in under the average.

Also, if you place a simple MA arrangement on the Daily chart, using one SMA8 and one SMA21, you will see that 8 is now crossing from underneath 21 to the upside and both lines are now touching. That guarantees some unstable price action underneath the Daily time-frame, which can be seen in charts like M15 and H1.

So, that's causing the technical congestion we are now seeing expanded across the smaller charts. Just FYI.

Hey 'Swap Meet'.

You have my undivided attention, but this is starting to seem like a whodunit. The heart of your method appears to be identifying a good V-trigger. I've read this thing twice and can't see where you've explained--exactly--how it's done, unless it's the custom indi you're using. If that's the case, will the secret indi be revealed at some point? Will it be shared freely?

Oh, and was today's swap line selected randomly for test purposes or did you choose it in your usual way?

Thanks for any enlightenment you can provide.

It is funny, the kinds of things you notice, when you pay attention to multiple time-frames.

As I've said all along, the key to trading a good line, is making sure the line contains Swing and Momentum probability. As it turns out, I have an indicator that is rather simple. It tracks the Open to High/Low condition of each time-frame. If the Close is above the Open, the indicator turns green. If the Close is below the Open, the indicator turns red - for all time-frames.

If I use a fixed hour as reference point for drawing the line, then use the indicator to make the directional decision for entering the market at the top of the hour, I've noticed that I end up with a pretty nice V-Trigger.

The indicator turns off (changes color to gray) when there is a condition where there is no aggregate agreement among the time-frames. That "off" condition seems to be an indication of "take profit and draw another line."

I'm going to play with this idea a bit, to see if it offers more than the current V-Trigger arrangement, or whether it can be used in conjunction with the current V-Trigger for better risk control.

Just thinking out loud a bit.

I'm saying that you can trade a line on a charts - that's about it. I'm not really trying to elaborate in every detail of how I do it. People do it differently, but I've stated in this thread the reasons why I think it is important to maintain at least two tenets to line trading:

1) Make sure your line contains good Swing probability
2) Make sure your line contains good Momentum continuation probability (Magnitude)

Beyond that, Swapping techniques will vary widely. I've outlined my three (3) techniques above: Close, RPO and Ask/Bid Cross of V-Trigger line. All pretty straight forward.

In addition, I've also talked about how one might locate good lines by using Harmonics and I gave some information on how that can be done. I gave information on how one might use simple Fibonacci ratios by themselves and/or with Harmonic legs and points, as well as how that might be done.

So, when you say that you've read the thread twice - I might say: Really?

If you have some questions - let me know. If I can answer them, I will. But, this is not really all that difficult, once you stop to think about what's being said. Days like today, where Daily volatility is being compressed, make trading a line very difficult. That's also part of what my journal is all about - finding the limits of line trading and discovering how difficult it is to recover. I already know how easy it is to trade. But, I also need to know the downside risk in all its ugliness as well.

Twice. Honest. Hey, if you're gonna start a thread, you have to expect a few dummies to stop by.lol

Tell ya what--I'll just follow along here and at your trading journal until it sinks in.

Thanks

So, lets do some Recovery Analysis.

I now have a failed trading session. I'm roughly -118 pips down on the day. The fuel reserves on the Day have been depleted to within 25% of empty. The Daily range is around 140 to 145 pips and the remaining time in the Daily trading session is 3 hrs, using a 0500 hrs to 1700 hrs GMT trading period.

Ok, based on the above, what do I do?

I turn to the Weekly range to check on its status. What I find is that the Weekly range is between 355 to 388 pips tall. I also note that the current real time range is now 138 pips, which is roughly 35% of normal range. I then note the Day of Week and recognize that it is now Tuesday. I also note that the Weekly range has been on the decline since last week, where only 61% of normal range was seen for the week.

I then turn to the Monthly range. There I note that the range is between 748 to 782 pips tall. I note that currently, the Monthly range has reached 108% of normal, which means that the Monthly fuel tank is relatively empty.

I then note the Direction of volatility for the Week and the Month and find that they are both UP (Long). I note that the Daily Direction has been split and that the H4 Direction is currently UP (Long).

I say to myself: Hmmmmm. Monthly range complete and up; Weekly range expanding and up; Daily range compressing and split; H4 nominal and up.

At some point, I come back to focus on the Weekly data. I don't care in which direction it ultimately decides to move, I just want it to move. Given that it is the strongest link in the chain, I'll use its data.

Currently, only 35% of its fuel has been consumed and it is still early in the week (Tuesday). In a normal Weekly trading cycle, the Monday high or low is traditionally extended several times on the Hourly chart (that's how the Weekly range is established). Looking at the hourly chart, I see that there has been no extension of the Weekly high or low beyond Monday's high and low.

Based on that rough analysis, I should be able to use the remaining fuel in the Weekly range tank (about 75% full), which amounts to about 217 pips in range coverage from the current Weekly high -or- current Weekly low. To reach the current Weekly high would require a move of 58 pips up from the current Close. To reach the current Weekly low would require a move of 79 pips down from current Close. 58+79 = 138 pips, the current Weekly range at 36% fuel consumption.

So, I'm very interested in the remaining 70%+ fuel in the Weekly range, the fact that it is only Tuesday and that fact that there has been no extension of the Weekly high or low on the H1 chart, which is normal and historically routine.

Therefore, I'll continue to Swap and probably even consider extending the Swap range slightly while the Weekly range decides what it wants to do, knowing that about 200+ pips are still in tow for the week, beyond the current Weekly high (which adds an additional 58 pips, for a total of 275 pips) -or- beyond the current Weekly low (which adds an additional 79 pips, for a total of 296 pips).

In each scenario, the current failed trading session at -118 pips is covered, as long as I get a push beyond the Swap line that is sustained, before running out of fuel for the Week. Thus, I have approximately 82 pips of reserve fuel left (using 200 pips out of the 217 remaining in the Weekly range), before I reach a critical failure level where full recovery becomes highly unlikely.

That's my analysis. Let's see how it pans.

Maybe the recovery analysis will help.

Ok, so - following up on the heels of the recovery analysis, I've decided to go ahead and switch over to a Weekly Swap Sequence.

Since price remains above the Weekly open, I'll continue to hold using the remaining 82 pips of reserve fuel before a critical failure occurs. And, I'll do this on the strength of the Weekly range needing to be fulfilled, the fact that it is still early in the week (Tuesday), the fact that less than 40% of the Weekly range has been consumed and the fact that neither the Weekly high or low has been extended as history dictates it should.

Currently held Swap position is up +13 pips, while balance for this trade cycle is now down -129 pips, for a net -116 pips with at least 200 more to go for the Week in either direction relative to the Weekly open level at $1.38499.

Weekly low: $1.38220
Weekly high: $1.39597
Current close: $1.39240

I expect the Weekly range to expand - either direction will do.

Since my current Swap position is Long, I can hold that position for 82 pips downward, or until $1.3842. At that point, the trade becomes terminal and not even the Weekly range will be enough to save it. However, holding the current Long position from the current close of $1.3924, I will need to see the Weekly high expand to $1.4040 in order to reach a full recovery.

So, that's what it comes down to:

- Full recovery at 4040.
- Terminal at 3842 with a 198 pips loss.

Now, this is of course, one way to recover. I could do this an entirely different way by moving the Swap Sequence down in time-frame instead of up to the Weekly time-frame.

Moving the Swap Sequence down in time, means using smaller bars to scalp the market for 3-5 pips until full recovery is realized. Current net is -116 pips. At +3 net pips per scalp, I'd be looking at a total of 38 scalps between now and the exhaustion of the Weekly range, in order to break even for the trade cycle. At +5 pips per scalp, that becomes slightly more than 23 total trades between now and the Weekly range exhaustion.

The scalps would simply be smaller versions of the same line trade, but using a Volatility Trigger on small time-frame, or using the same M15 time-frame that I use right now, but closing all trades after +3 or +5 pips net gain. However, I will not use this recovery strategy on this trade cycle, though it is a fairly good recovery method to use when you have less than 125 pips to recover and plenty of fuel remaining in the Weekly tank (range).

Ok, so you know my decision at this point. I'll call it a day, set the Stop on the current Long at 3842 and let the Long ride to recovery.

Hello Line in the sand,

many thanks for your sharing,

just some question, can you tell us which broker you are using, i want to make sure that the timing line up with yours in your journal?

in your latest journal post, you say you enter at candle[1], is that candle with the yellow vertical line or the next one? is the candle[1] also the V-trigger?

best regards.

-guandi

guandi,

I'm using the standard MT4 bar position identifier. So, [1] is always the bar after the current bar, which is always [0].

My live production platform is BARX.

Because I can more easily get custom indicator work done in MT4, you see pics from that platform on this forum for testing purposes and for charting only. The live test and demo test platform for trade execution is FXCM for convenience sake.

Recovery analysis follow-up.

Germany has decided to participate and do its part in facilitating the U.K.'s version of a quasi QE3. So, the EURUSD got a pop on that news.

Nothing else has changed the recovery analysis, other than the fact that it is now Wednesday, which is typically "moving day" in most U.K. based currency pairs, so I'm not surprised to see it move today.

Current position is still Long and holding for the Weekly expansion to 4040, or Terminal at 3842. Note: Weekly open was 3849. So, switching to that as the Swap Line, keeps the Long hold in play.

See trade journal for latest pics.

For whatever it's worth your line appears to be almost at the Point of Control on the market profile. Yesterdays POC for EURUSD was 1.39167 and yours was plotted at 1.39210.