Low stress swing trading with momentum

Hey Swede, welcome

I keep an eye on supply and demand and swing highs and lows, but no longer just enter on them aggressively and try to pick perfect entries with tight stops like I used too. I got tired of getting hit by the bus.

Now I try to keep an eye on those areas but try to judge momentum, risk sentiment and a basic understanding of how the markets move and react before entry and exit.

I no longer just focus on a few majors like EU, AU and GU either. I'm doing much better with a little bit of everything. If one pair is stalling in a tight range for days, something else is often moving nicely.

Hello, good to see you pop in here too.

I do much better on longer term charts than I ever did off short term charts.

What happened to the santa rally? Pk where is the money flowing to now.still holding cable and gbpjpy

Mabey the Euro Grinch stole it.

You can look at the trade explorer to see what I hold.

Here's everyones homework assignment ... Look up the santa claus rally and the january effect, learn what they are and what they mean. It's part of understanding and learning how and why the markets move. It doesn't always happen but the odds are 75% that it does.


Give a man a fish, feed him for a day.
Teach a man to fish, feed him for life.

PK do you agree that the trend is actually down on the daily charts for gbpusd and gbpjpy? My is guess you are holding because you are treating the sell on the pairs as retracements for a larger move up or based on all other key factors you put together to make your trading decisions. or better still your 300 pips mental stop has not been breached.am i right?

With Chinese PMI out saturday, I'm locking in profits, cutting losses and going into the holiday weekend flat except for the Eur/Chf pair. I am adding a position at a better price to that trade.

Markets are thin and mixed. I don't know why the yen is strong as well as the commodity currencies the last couple days. I don't see yen strength this week as a risk off move.

My best guess is year end repatriation flows by multinational companies that were waiting and hoping for a weaker yen to repatriate currencies from abroad and boost their bottom line but didn't get their christmas wish and had to bring the money home now at a higher price. I'd bet we see some weak 4th qtr reports from some big Japanese companies.



That's all for now. Have a great holiday weekend and a healthy and wealthy new year.

GU longer term is down but the shorter term looks sideways. GJ trend is down.

I hold trades based on my perception of the markets risk appetite and I don't care if a trade is 1 pip or 300 pips underwater. I will kill it once I feel I'm wrong.

This week the pound, euro and Yen didn't want to play nice. I still have met my goals. I think the drop in the Euro, Pound and Yen is over done but it doesn't mean everyone else thinks like I do.

Headline risk out of europe is still the markets main focus and a slowdown in China is gaining attention which will affect risk appetite for commodities and commodity currencies.

STOP

If you are not disciplined, you will have a lot less stress in your life if you just go ahead and send your money to me instead of sitting at the computer all day watching your Forex account get blown out because you were trading on hope, didn't have the discipline to admit you were wrong and stop out the bad trade and take a small loss and are screaming at the computer while praying the trade will come back to you while keeping on adding on more and more "better" positions because it's just too much money to kill the trade in a loss and are forced into a margin call with a devastating loss.

That might sound a little funny to some but it's not funny and it's the cold hard truth. If you don't believe me, look around the forums, almost every long running thread has someone or several people that have posted a disaster story.

Ladies and gentlemen, I see this sad story play out every day.

________________________________________________________________________

The vast majority of traders on the forums here, either have a job or go to school or sometimes both. Everyone has dreams of wealth, early retirement etc....... That's OK and I think it's healthy.

However........While some can trade at work or sneak in a trade at school, many can't.

Some can't even look at a chart until they get home. but they place trades off a 5 or 15 minute chart with too big of a position size before they run out the door to work or school and then as soon as they get home, they bitch about their stop loss got hit, TP missed by 1 pip and SL got hit, they lost too much money, they have to go back to demo until they make more money to trade live etc.....

I have a one word question for those that do that........

WHY???

I think that's insanity. !!! That's not trading, that's gambling. Rolling the dice hoping you hit the jackpot but your $100 instant lottery ticket didn't win. If you can't trade during the day, why are you trading intraday charts or worse, using charts that are used for scalping.

There is nothing wrong with working or going to school while you have a trade running but in my honest opinion you should be looking at daily or weekly charts where you only need to look at positions and make adjustments once a day or once a week. Use position sizes that allow bigger stops to try to avoid the intraday noise. Learn to trade properly and build wealth while you are still working until you are completely ready to be like Johney Paycheck and sing "Take this job and shove it" to the boss and go work from home or retire early.

Yes there are the those that will tell you I'm full of S$#T and you can trade a 5 minute chart on auto pilot while you are gone 8, 10 or 12 hrs away from the charts, but for every one person that can do this well, there are 99 that can't. Personally I bet the numbers are even far worse than that.

It's also a fact that most traders just have to be in a trade all the time. It's a very rare trader that can just sit on their hands for days or weeks and do nothing. Me, I have a very hard time sitting on my hands when not in a trade. I like to have at least something working for me at all times.

It's 2012. A new year ripe for a fresh start so take a deep look inside yourself and come up with a realistic plan to attain your goals.

Now if you have decided it's time to trade and not gamble you need to be honest with yourself and figure out what your real needs and restrictions are, organize it and come up with a plan that you can actually follow. Most likely you have already been trying to trade demo or live and have tried putting indicators that look good on a chart or see something you like but really need to learn how to put it all together and make it work right. Learn how to manage your risk capitol so your losses are small and you can take the hit without emotion. When to place an entry, where to place a stop loss order and the hardest one of all ... where do you exit to maximize the profit and make as much as you can off the trade. Most trading plans and systems will work if you actually have a plan and set realistic goals and are honest about your own limits. So I'm making a plan up completely from scratch..... Here it is.

My trading criteria

1. I live in an area that doesn't have super high speed internet. I have decent DSL speed but certainly not the best for scalping and it's definatly not the most reliable internet service I've ever had either.
2. I don't want to sit at the computer all day staring at the monitors.
3. The trading plan needs to be very simple. I want something I can easily memorize and execute like a robot. I do not want to have to go through a 10 page pilots checklist to be able to make a decision.
4. It must provide an easy way to determine the placement of the initial stop loss
5. It must provide an easy way to trail the stop to maximize profits and let winners run
6. It must be a clear visual system where I can make a decision with a quick glance.
7. I want to almost always have something trading.
8. I only want to spend a maximum of an hour or 2 a day looking at charts, picking entries, placing stops and trailing stops on my live positions.
9. Must be profitable to build wealth but have the potential to live off my profits. I'm not living off my trading right now, I'm building wealth. I'm retired already at the ripe old age of 46, I retired 6 years ago from the Army at 40. I want to build wealth to enjoy things beyond my pension and leave plenty behind for my children and grand children. I'm 100% medically disabled retired military so I want to also protect myself in case these idiots in the White House decide they have to put me on an austerity program or start taxing my VA disability pay...... or both so they can keep up pork barrel spending on pet projects like the bridge to nowhere, give themselves another raise and hire more idiots for the TSA to strip search your grandmother or confiscate your cupcakes at the airport security line because the icing on it looks like a gel like substance.

This is a very simple, but very rule based, daily chart mechanical swing trading strategy that requires very strict discipline that I plan to test live for a minimum of 2-3 months. Most trading decisions can be made during the quiet time between the NY close and the Asian open after the daily candle close.

Please Note: The small IBFX account I allow everyone to see in the trade explorer is the live account I use for strategy testing. You should be trading your own plan, make your own decisions and trade at YOUR comfort and skill level. I do this for educational purposes only. If you copy my trades into a live account, you do so at you own risk.

I've been honest with myself about my trading criteria so I played around with my charts a bit this weekend and I see something I like. It looks like it could be very profitable. It looks easy enough to make a simple plan that I can follow but it's a trend following system that will get me whipped a bit during periods of consolidation or trend reversals. I believe I can put some simple rules in place based on these indicators and make it work. I have an idea but I can see where I can easily get whipped at times so I want to keep my losers small. I also see times where I can get into some of what I call monster trades that will last 1 - 2 months and net me a profit of 500 - 1000 pips before I exit and I really want to maximize them as best I can.

 

1. Chart setup
   1. Bar chart with the setting to have the chart on the foreground. You don't need bars on the chart but I prefer them there because I like to be able to see where price is really at by just a quick glance at the chart when using Heiken Ashi candles, WYFX candles, Renko bars or whatever you prefer.
   2. WYFX candles with default settings except candle color and candle body thickness
   3. 10 EMA, 0 shift, add 2 levels 200 and -200 to create an entry zone (this is a 5 digit broker so a setting of 200 sets a 20 pip range each side of the EMA)

Let's make a simple plan.

Start with money management, determine your level of risk and figure out what instruments you plan to trade.

 

1. Money management
   1. 1 Micro lot per $1000 of risk capitol maximum. It is OK to lower this ratio but DO NOT increase the ratio and over leverage. Over leveraging your account is the fastest way to blow it out with a margin call. No trading system is perfect, you WILL have bad days, bad weeks and possibly even bad months. Big funds often have bad years.
      1. Just keep it simple, Each pair has it's own currency value per pip but it should average out over time.
      2. There's no need to complicate things trying to calculate the pip value, position size vs maximum percent risk for each pair.

2. Pairs traded
   1. The majors and major crosses only. It's OK to trade only one pair too. Me I like to trade several pairs and I have a higher risk tolerance than some and I am fairly agressive by taking almost every opportunity I see.
   2. No exotics
      1. This means both sides of the pair will have one of these currencies.
      2. EUR, USD, AUD, GBP, CAD, CHF, JPY or NZD only

   3. NOTE: EUR/CHF and USD/JPY is off limits to short because of intervention risk. EUR/CHF I trade only long when price is below 1.22 and stop loss below 1.20 and I wait for a rally toward 1.24 on rumors the Swiss will raise the floor to 1.25. The Japanese central bank likes to intervene and spike the yen with the USD/JPY so close to historic lows. If you are new and/or are not familiar with what is happening in these 2 pairs with the intervention, do not trade them.D some research and learn what is going on with them first.

Now that you are done with the boring stuff that many don't think they need and skip. Let's get down to the fun stuff and figure out how to make money. Look at the tools you want to use and figure out how to use them to keep losses small and let winners run to their fullest potential.

 

1. Trade direction.
   1. Green candle - Long
   2. Red candle - Short

2. Entry
   1. Wait for price to retrace to close to the 10 EMA entry zone
      1. NOTE: Understand that on the current day the EMA is dynamic and will move as price moves, you can try to project your entry and the EMA zone with simple trend lines .

   2. Use a limit order for the projected 10EMA zone price. Sure you can manually enter the trade but can you really efficiently watch 20+ pairs for that good entry and catch it when it happens...... Probably not.
      1. Note: exact entry on the baseline 10 EMA isn't important but you do want the entry in the 10 EMA zone. If it doesn't come back to the zone, let it go and enjoy the show. Don't chase it, let it come to you.

   3. If entry not met by the daily candle close, trail the limit entry along the projected EMA zone.

3. Initial Stop loss
   1. Long entry
      1. Place the stop loss the pairs average spread in pips below the previous days WYFX candle or bar whichever is lowest.

   2. Short entry
      1. Place the stop loss the pairs average spread in pips above the previous days WYFX candle or bar whichever is lowest.

4. Trailing stop
   1. Long entry
      1. Move the stop loss after each days candle close the pairs average spread in pips below the previous days WYFX candle or bar whichever is lowest.

   2. Short entry
      1. Move the stop loss after each days candle close the pairs average spread in pips above the previous days WYFX candle or bar whichever is lowest.

   3. NOTE: Very, very important. You want to let winners run as far as they can. Maximize the winner and keep the losers small. Unless you have some monster trade that just takes off parabolic and runs 300, 400 or 500 pips profit in a couple days, DON'T cut winning trades short, let the winners run. Trail the stop every day until the trailing stop takes you out.

I realize many have busy schedules with work, school, family etc........


You probably don't have time to spend hours a day going over fundamental and reading every market analists article but I think you should at least look into the major news outlet headines to see what is going on and what happened each day and at least look at a summary of what happened during each trading session.

I like to scan Market Watch, CNBC, Reuters and Bloomburg for the headline stories and for a nice summary of each trading session I look at the summary for each session at Forex Live. These guys do a pretty good job of summarizing the trading sessions.

Also keep an eye on the economic calender. Know what is coming up, learn to understand how certain data can really impart the risk sentiment of the markets and learn to understand the basics of what the data means.

Take the time to try to learn what is moving the markets and how they react to events. You don't need an MBA or a doctorate in economics and spend 10 hours a day studying the fundamentals. But you should spend a few minutes each day trying to learn something and over time it will make a big impact on your trading.

Back testing results.

Before I commit live funds I am going to spend a day or 2 back testing last years data. Back testing does not guarantee future results but can give you an idea if a strategy is worth going forward with to trade live. Be honest with yourself when you back test and use worst case scenario results, not best case scenario results.


I will post my results in this post when I am done.



ADD:

I've done some basic back testing and so far it's profitable but I don't like what I'm seeing. It definatly needs a better filter to keep from getting whipped and an earlier entry would often help too.

Here are the results so far on 4 pairs I've looked at from Jan 2 2011 to Dec 31 2011

AUD/CAD - Profit 175 pips, 13 wins, 21 loses, win ratio 38%

AUD/CHF - Profit 995 pips, 14 wins, 26 loses, win ratio 35%

AUD/JPY - Profit 1029 pips, 11 wins, 26 loses, win ratio 30%

AUD/NZD - Profit 325 pips, 11 wins, 25 loses, win ratio 31%

Like I said, it could be profitable but it's not what I'm looking for......... NEXT!!!

Hey pK....
You have made some excellent points here, most of which I agree with and practice myself.
I do not however list to the talking heads.......... My methodology is purely rule based and mechanical.

Even if I wanted to trade a scalping system I think it is an insane methodology.... I choose to have a life outside the box and screen.

anyway I have subscribed to your thread and will be following your progress with interest.

Also I think a vouch is in order for your work here..

May this year be your best year yet.... Remember, Success is the best revenge.

I'm killing the last trading plan. 1 year of backtesting done on 4 pairs and I'm not happy with the results so I'm moving on.

I'm going back to parts of the THV3 system I have been using.

Now I can skim the articles and spend a few minutes, but that is after spending 6 months or more working at understanding the issues on a full time basis.

For me the key to fundamentals is not the news on the calendar or the odd twitter headline, but the underlying structural issues that applies persistent and consistent pressure to a currency over weeks and months.

If I were to relearn what I know, I think the fastest way would be to spend a lot of time on the reports from the central banks. Their conclusions are not that important but their way of thinking about the issues are. If anybody knows what is going on it is the CBs. Further, the central banks have absolutely the best data on the planet and although they don't let you see it, you can judge their reactions to their news feeds.

Hi PK - would you care to elaborate.....

Thank you Aaron, Excellent advise. I definatly takes time to learn and grasp the real world macros and how things fit together. I didn't wake up one day and was suddenly a market genious. It took years to get to where I'm at today and it took a lot of hard work and studying.




Yes,

The basic point of my last several posts was to teach how to come up with a basic trading plan. I'm confident I could make money with the last system I posted but it's not what I want so it's back to the drawing board digging deeper into one of the best sclaping systems I've seen and adapting it for swing trading off daily charts.

I'm still working on a purely mechanical plan. I want one that:

 

1. Lives up to my screen name "Pip Killer"
2. Is simple
3. Is highly visual so you can make a quick decision at a glance
4. Has a decent/win loss rate (around 60%)
5. Provides a dynamic way to pick a good entry
6. Reasonable stop loss that can keep losses to roughly 1%
7. One that allows you to let a trade run and provides a clear signal to exit
8. One that provides a dynamic way of picking off an occasional wild spike or parabolic run in your favor.

I'm getting ready to back test my lastest creation and put the plan on paper. At a glance it looks pretty good

Will be back with results soon, hopefully tonight.

Thank you and welcome.

Here is a sneak peek at what I am working on. I'm still fine tuning this strategy and once I am happy with the results I will post the plan the back test results and take it live.

Where I'm having the biggest problem solving is how NOT to get whipped in a sideways market as this is pretty much a trend following breakout system. I've never been really good at trading a sideways market so any suggestions are appreciated.


This is pretty much the THV3 system and I have cleaned it up to my liking. Cobraforex and the rest of the THV team put a lot of hard work building this system and they deserve a lot of credit.


Here's what I'm looking at right now. The only indicator not included is the 10 EMA which is included with your MT4 software.



Here's my template


The full THV3 system files


THV3 info panel not in the THV3 files


Matrix to relace the Ichimoku Kinko Hyo cloud in the middle of the chart